Penske Automotive Group reports mixed results amid market challenges

• increase in revenue: Fourth-quarter revenue increased 4% to $7.3 billion.

• Decrease in profits: Earnings from continuing operations attributable to common stockholders decreased 36% to $190.7 million in the fourth quarter.

• Adjusted profit: Excluding goodwill impairment charges, adjusted earnings from continuing operations decreased 22% to $231.4 million in the fourth quarter.

• Full-year results: Full-year revenue rose 6% to $29.5 billion, but adjusted profit from continuing operations fell 21% to $1.09 billion.

• dividend increase: The Board of Directors approved a 10% increase in the quarterly dividend to $0.87 per share.

• Stock buyback:2.6 million shares were repurchased during 2023 for approximately $358.7 million.

• acquisition: In January 2024, PAG completed its acquisition of Rybrook Group Limited, with estimated annual revenues of approximately $1 billion.

Penske Automotive Group (NYSE:PAG) releases its 8-K filing on February 7, 2024, revealing mixed financial results for the fourth quarter and full year of 2023 . The company is a diversified international transportation services company and one of the world's leading companies. The major auto and commercial truck retailer reported a 4% increase in fourth-quarter revenue to $7.3 billion. However, profit from continuing operations attributable to common shareholders decreased significantly in the fourth quarter to $190.7 million, a decrease of 36% compared to the same period in 2022. Earnings per share also decreased by 33% to $2.84.

Fourth quarter results were impacted by a $40.7 million non-cash goodwill impairment charge, lower Penske Transportation Solutions (PTS) equity earnings and higher interest expense. Excluding goodwill impairment charges, adjusted earnings from continuing operations decreased 22% to $231.4 million and adjusted earnings per share decreased 18% to $3.45. Foreign exchange had a positive impact of his $130 million on revenue, but had little impact on profits and his earnings per share.

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Performance highlights and financial performance

PAG operates approximately 150 light vehicle dealerships in the United States, including Puerto Rico, and 189 franchised dealerships internationally, primarily in the United Kingdom. The company sells more than 35 of his brands, and a significant portion of its auto retail revenue comes from luxury and imported brands. PAG also owns 44 truck dealerships and 20 of his CarShop used car stores in the US and UK.

For the full year 2023, PAG's revenue increased 6% to $29.5 billion. However, earnings attributable to common stockholders decreased 24% to $1.05 billion, and earnings per share decreased 16% to $15.50. Adjusting for goodwill impairment charges, earnings from continuing operations attributable to common stockholders decreased 21% to $1.09 billion, and adjusted earnings per share decreased 13% to $16.10. . Currency exchange rates had a slight negative impact on full-year sales, profits, and earnings per share.

Automotive retail same-store revenue increased 5%, with the most notable increase being 9% in service and parts. However, same-store gross profit decreased slightly by 0.4%. Retail commercial truck same-store revenue and gross margin increased modestly by 1% and 3%, respectively. PAG's investment in his PTS recorded a decline in revenue due to higher interest and maintenance costs, lower gains on sale of used trucks, lower rental income and occupancy rates.

Chairman and CEO Roger Penske said of the results, “Demand for new vehicles remains strong, but used vehicle supply and affordability remains tight. “We are pleased with the company's strong growth and continued focus on cost management.” , We are particularly pleased that Retail Automotive's gross margin per new and used vehicle unit sales decreased only slightly from the third quarter to the fourth quarter of 2023. ” He also noted that PAG achieved its third most profitable year in history.

In the interest of corporate development and capital allocation, the PAG Board of Directors has approved a 10% increase in the quarterly dividend to $0.87 per share. The Company also repurchased 2.6 million shares of its common stock for approximately $358.7 million and acquired additional shares from employees in connection with employee stock awards. PAG expects he will complete his Rybrook Group Limited acquisition in January 2024 and will contribute approximately $1 billion in estimated annual revenue.

The company's performance reflects the resilience of its diversified business model amid market challenges, including supply constraints and changing consumer preferences. Increased dividends and share buybacks demonstrate PAG's commitment to delivering shareholder value, while strategic acquisitions such as Rybrook Group Limited point to continued growth prospects.

For more detailed financial information and to listen to a conference call regarding these results, investors and interested parties should visit the Investor section of Penske Automotive Group's website at www.penskeautomotive.com.

For more information, see Penske Automotive Group Inc's full 8-K earnings release here.

This article first appeared on GuruFocus.