Penske Automotive Group Inc (PAG) Reports Q3 2023 Earnings

• Quarterly revenue increased by 8% to $7.4 billion

• Net income attributable to common stockholders decreased by 23% to $263.4 million

• Increased quarterly dividend by $0.07 per share, or 9.7%, to $0.79 per share in October 2023

• Strong performance from North American automotive and commercial truck operations

On October 25, 2023, Penske Automotive Group Inc (NYSE:PAG) announced its quarterly results for the third quarter of 2023. The company reported an 8% increase in revenue to $7.4 billion. However, net income attributable to common stockholders decreased by 23% to $263.4 million, and related earnings per share decreased by 15% to $3.92. The decrease in net income is attributed to costs related to hail-damaged vehicles and business disruption from severe storms that impacted operations.

Financial Highlights

Despite the decrease in net income, Penske Automotive Group Inc (NYSE:PAG) reported several financial achievements. The company's retail automotive same-store revenue increased by 9%, including a 9% increase in service and parts. The retail commercial truck same-store gross profit also increased by 6%. The company also increased its quarterly dividend by $0.07 per share, or 9.7%, to $0.79 per share in October 2023.

Performance Analysis

The company's results for the third quarter of 2023 were driven by strong performance from its North American automotive and commercial truck operations. This was partially offset by lower earnings from its U.K. automotive operations, higher interest expense, and lower equity earnings from its investment in Penske Transportation Solutions. Foreign currency exchange positively impacted revenue by $172.4 million, net income attributable to common stockholders by $1.3 million, and earnings per share by $0.02.

Commentary

Our diversified business produced another solid quarter of profitability. The new vehicle market remains solid while used vehicle supply and affordability remains challenging. I am particularly pleased with the 9% increase in same-store service and parts revenue. Additionally, our equity income from Penske Transportation Solutions improved sequentially as long-term contract sales remain strong." - Roger Penske, Chair and CEO

Future Outlook

For the nine months ended September 30, 2023, revenue increased 7% to $22.3 billion. When compared to the same period last year, net income attributable to common stockholders decreased 20% to $0.9 billion from $1.1 billion, and related earnings per share decreased 12% to $12.64. Foreign currency exchange negatively impacted revenue by $149.5 million, net income attributable to common stockholders by $7.1 million, and earnings per share by $0.11.

Capital Allocation and Corporate Development

Based on the company's strong earnings and cash flow, the Board of Directors has increased the quarterly dividend four times in 2023 from $0.57 per share to $0.79 per share, representing an increase of 39%. During the nine months ended September 30, 2023, the company repurchased 2.5 million shares of common stock for approximately $341.1 million under its securities repurchase program and also acquired 168,103 shares of its common stock for $23.4 million from employees in connection with a net share settlement feature of employee equity awards. As of September 30, 2023, $233.1 million remained available under the company's existing repurchase authority.

Explore the complete 8-K earnings release (here) from Penske Automotive Group Inc for further details.

This article first appeared on GuruFocus.