Penske Automotive
Group Inc. is accelerating share buybacks after the car-dealership chain reported steeply larger income because the industrywide automobile scarcity continues to bolster costs.
Bloomfield Hills, Mich.-based Penske has repurchased 1.9 million shares this yr by way of April 26, 1.2 million of them within the first quarter. That quantity was up from 800,000 shares purchased within the fourth quarter. Last yr, the corporate bought 3.3 million shares whole.
Altogether, the corporate spent $294 million on buybacks in 2021, adopted by $184 million to date this yr by way of April 26. Penske’s share value on Friday closed at $104.82, about flat from the start of the yr.
The firm expects to proceed utilizing buybacks to allocate money, assuming market situations maintain regular and it receives approval from the board, mentioned
Shelley Hulgrave,
Penske’s chief monetary officer. U.S. automobile dealership acquisitions—one of many firm’s most popular methods to place capital to work—have develop into dearer over the previous yr as their income have climbed, Ms. Hulgrave mentioned.
“We think it is a great use of cash compared to the high valuations of acquisition opportunities,” she mentioned, referring to share repurchases.
Last week, Penske mentioned it had $46.3 million left to spend underneath its present buyback authorization. The firm’s board has been supportive of buybacks, Ms. Hulgrave mentioned.
Companies have been unveiling plans to purchase again shares at a file tempo this yr, profiting from current market volatility following Russia’s invasion of Ukraine and uncertainty on interest-rate hikes from the Federal Reserve.
Profit at Penske greater than doubled throughout the first quarter from a yr earlier, to $367.9 million. Revenue jumped 21%, to about $7 billion. Cash and equivalents on the steadiness sheet elevated to $170.3 million, up from $100.7 million on the finish of 2021.
The firm, in addition to different dealership chains, are benefiting from a mix of things, together with a scarcity of autos as a result of chip-supply issues, regular shopper demand and excessive sticker costs. Other automobile retailers, together with
Lithia Motors Inc.,
AutoNation Inc.,
and
Asbury Automotive Group Inc.,
additionally reported stronger first-quarter earnings.
“It’s just a great time to be an auto dealer,” mentioned
Ali Faghri,
an analyst with funding agency Guggenheim Securities. Other dealership chains are additionally utilizing their extra money for buybacks and acquisitions, he added.
At Penske, gross revenue per automobile for brand spanking new automobiles elevated 68% from a yr earlier, to $6,840, whereas the identical metric for used automobiles rose 26%, to $2,284.
In addition to retail automobile gross sales, Penske additionally sells business vans and operates a automobile distribution enterprise. As of March 31, the corporate’s retail auto enterprise, which incorporates companies and components, accounted for 84% of income, whereas its truck dealership division accounted for 12%, in accordance with Ms. Hulgrave. Its distribution enterprise made up the remaining, she mentioned. The firm’s dealerships are positioned within the U.S., U.Ok., Canada, Germany, Italy and Japan.
While the corporate remains to be all for acquisitions, it’s being extra selective than it has been previously given the excessive valuations throughout the business, Ms. Hulgrave mentioned.
In April, Penske acquired three BMW Mini dealerships and a service middle within the U.Ok., in addition to a BMW Mini dealership and repair middle primarily based in Escondido, Calif. In February, it purchased Team Truck Centres, a Canadian business truck firm.
Penske didn’t disclose a purchase order value for any of the acquisitions. The offers have been funded with money stream from operations, Ms. Hulgrave mentioned.
Write to Kristin Broughton at [email protected]
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