This story was originally published on WardsAuto. To receive daily news and insights, subscribe to our free daily WardsAuto newsletter. Penske Automotive Group (PAG) on November 19 announced it had acquired two Toyota and two Lexus dealerships, including Longo Toyota, the top Toyota dealership in the United States. Publicly listed PAG acquired the franchises from Penske Motor Group, part of Penske Corp. You might be forgiven for being a bit confused with all the Penskes in that paragraph. But the transa ...

Core Points - Mouser Electronics is sponsoring the DS PENSKE Formula E racing team for the 2025/2026 ABB FIA Formula E World Championship season, starting on December 6 in São Paulo, Brazil [1][2] - The team features rookie driver Taylor Barnard and veteran driver Maximilian Günther, with Barnard achieving the third-fastest overall time during pre-testing in Valencia, Spain [2] - Mouser has been a supporter of Formula E since its inception, emphasizing the series' commitment to sustainability and performance in electric motorsports [3] - The Formula E season will consist of 17 races across eleven venues, including Miami, Jeddah, Monaco, Shanghai, Tokyo, and a double-header finale in London [4] Company Overview - Mouser Electronics is a global authorized distributor specializing in New Product Introductions from leading manufacturers, offering over 6.8 million products from more than 1,200 brands [8] - The company operates a state-of-the-art distribution facility in the Dallas, Texas area, shipping to over 650,000 customers in 223 countries/territories [8] - Mouser provides extensive technical resources on its website, including product data sheets, reference designs, and engineering tools to assist customers in their design processes [6]

Core Insights - Penske Automotive Group has acquired four dealerships, including Longo Toyota, the largest Toyota dealership in the U.S., which is expected to add approximately $1.5 billion in estimated annualized revenue [1][5]. Group 1: Acquisition Details - The acquired dealerships include Longo Toyota and Longo Lexus in El Monte, California, Lexus of Stevens Creek in San Jose, California, and Longo Toyota of Prosper in Texas [1][2]. - The acquisition strengthens Penske's relationship with Toyota and Lexus, expands its presence in Southern California, and enhances operations in the fast-growing Dallas market [2]. Group 2: Financial Aspects - The purchase price was funded through a combination of existing credit availability and a note payable to the seller [2]. - The transaction closed on November 19, 2025, and further details were filed in the Company's Form 8-K with the SEC [2]. Group 3: Dealership Performance - The acquired dealerships retailed over 28,000 new and used units in 2024 [5]. - Longo Toyota has been the number one volume Toyota dealer in the U.S. for 58 consecutive years, while Longo Lexus has held the title of number one volume Lexus dealer in the Western U.S. for 35 years [5].

Group 1 - Barclays analyst John Babcock indicates investment opportunities in the automotive dealership sector due to expected profit growth in fiscal year 2026 and a recent decline in valuations [1] - The automotive retail industry is rated as "neutral," but certain companies show potential for above-average performance due to strong growth trends and resilience in adverse economic cycles [1] - Demand for used cars in the U.S. is weak, and auto credit data shows a decrease in demand in the subprime market [1] Group 2 - Companies rated "buy" include Carvana (CVNA.US) for its investment in optimizing online purchasing experience, while CarMax (KMX.US) is rated "sell" due to inconsistent operational performance and potential higher-than-expected loan loss reserves [1] - In the new and used car dealership segment, companies rated "buy" include AutoNation (AN.US), Group 1 Automotive (GPI.US), Lithia Motors (LAD.US), and Penske Automotive (PAG.US) based on strong same-store sales growth and stable operational performance [2] - Asbury Automotive (ABG.US) and Sonic Automotive (SAH.US) are rated "hold" [2]

Group 1 - The article does not provide any specific information or insights regarding a company or industry [1]

Summary of Penske Automotive Group (NYSE:PAG) FY Conference Call Company Overview - **Company**: Penske Automotive Group - **Ticker**: NYSE:PAG - **Shares Outstanding**: 66 million - **Current Share Price**: Approximately $160 - **Market Capitalization**: About $10.7 billion - **Net Debt**: $1.5 billion - **Ownership**: 28.9% of Penske Transportation Solutions - **Total Enterprise Value**: Approximately $10 billion - **Business Segments**: Retail automotive, commercial vehicle dealerships, and energy solutions [1][2] Core Business Insights - **Retail Automotive**: Operates 356 franchises, primarily in premium luxury segments across the U.S., U.K., Germany, Italy, Japan, and Australia [2] - **Commercial Trucks**: Sells around 20,000 commercial trucks annually through 45 dealerships, exclusively Freightliner [2] - **Recent Expansion**: Entered the Australian market with three Porsche dealerships [2] Financial Performance and Projections - **Cash Flow from Tax Deductions**: Estimated additional cash flow of $120 million to $150 million annually from accelerated depreciation on truck purchases, based on $3 billion in annual purchases [3][4] - **Investment in Penske Transportation Solutions**: Total cash invested is $956 million, with $2 billion withdrawn, indicating strong cash flow management [4] - **Flat Performance**: Penske Truck Leasing has seen flat performance this year, with a reduction in the vehicle fleet from 445,000 to 405,000 [5] Market Conditions and Inventory - **Inventory Levels**: Current industry inventory is 2.6 million units, down 35% from pre-pandemic levels. Penske's inventory is well-managed with a 49-day supply in the U.S. [11] - **Luxury Vehicle Market**: Average transaction prices have increased, with new vehicles averaging $60,000 and used vehicles at $40,000, reflecting a shift in consumer financing behavior [13][16] Consumer Behavior and Financing - **Financing Trends**: Increasing number of customers financing vehicles for longer terms (beyond 6-8 years), raising concerns about negative equity situations [14] - **Leasing**: Leasing has decreased from 40% to 32%, but remains a more affordable option for consumers [14] Challenges in Used Vehicle Market - **Low Lease Returns**: The availability of quality used vehicles is a challenge, with a focus on zero to four-year-old cars [23][24] - **Sourcing Strategy**: 84% of vehicles sold are self-sourced, primarily through trade-ins [23] International Operations - **U.K. Market**: Contributes about $9 billion in revenue (35% of total business). Facing challenges due to government policies on EV sales and higher taxes impacting consumer behavior [28][30] - **Chinese Dealerships**: Recently added eight Chinese brands in the U.K. to explore market potential, with limited capital investment [36][37] Parts and Service Business - **Revenue Growth**: Parts and service revenue has increased by 35% compared to 2019, driven by warranty and customer pay services [38] - **Warranty Issues**: Recent recalls (e.g., Toyota and Lexus) are expected to boost service revenue, although they pose brand management challenges [39][41] Conclusion - **Future Outlook**: Anticipates improved performance in the truck leasing segment as market conditions stabilize. The company is well-positioned to capitalize on its diversified business model and strong cash flow management [43]

Revenue and Profit - Total revenue for the nine months ended September 30, 2025, was $23.0 billion, with $19.7 billion from retail automotive dealerships, $2.7 billion from retail commercial truck dealerships, and $619.3 million from commercial vehicle distribution and other operations[123]. - Gross profit for the same period was $3.8 billion, comprising $3.3 billion from retail automotive dealerships, $420.9 million from retail commercial truck dealerships, and $134.9 million from commercial vehicle distribution and other operations[123]. - Retail automotive dealerships accounted for 85.6% of total revenues and 85.4% of total gross profit during the nine months ended September 30, 2025[126]. - Retail commercial truck dealerships, specifically the Premier Truck Group, represented 11.7% of total revenues and 11.0% of total gross profit for the same period[127]. - Total revenue increased by $104.5 million, or 1.4%, and gross profit increased by $5.9 million, or 0.5%, for the three months ended September 30, 2025, compared to the same period in 2024[145]. - Foreign currency fluctuations contributed an increase of $92.8 million in revenue and $13.4 million in gross profit for the three months ended September 30, 2025[146]. Sales Performance - The U.S. industry new light vehicle sales increased 4.3% to 12.3 million units during the nine months ended September 30, 2025, with retail sales up 5.0%[137]. - New retail unit sales (excluding agency) decreased by 714 units, or 1.4%, to 48,809 units for the three months ended September 30, 2025[159]. - Same-store new retail unit sales (excluding agency) increased by 146 units, or 0.3%, to 47,115 units for the same period[159]. - Retail unit deliveries of new vehicles increased by 6.4% in the U.S. but decreased by 5.2% internationally, with same-store retail units delivered increasing by 8.9% in the U.S.[160]. - New retail unit sales (excluding agency) decreased by 2,094 units, or 1.4%, from 2024 to 2025, totaling 146,957 units[195]. - Same-store new retail unit sales (excluding agency) fell by 1,425 units, or 1.0%, totaling 141,674 units[195]. Vehicle Sales and Backlog - North American sales of Class 6-8 medium- and heavy-duty trucks decreased 11.4% year-over-year to 309,294 units during the nine months ended September 30, 2025[138]. - The Class 6-8 medium- and heavy-duty truck backlog was 136,527 units as of September 30, 2025, down from 190,602 units a year earlier, reflecting a decrease of 3.1% since the prior quarter[139]. - New commercial truck retail sales revenue decreased by $134.5 million, or 17.8%, from 2024 to 2025, primarily due to a decrease in same-store new retail unit sales[175]. Expenses and Financials - Total selling, general, and administrative (SG&A) expenses increased by $22.3 million, or 2.5%, from 2024 to 2025, with same-store SG&A expenses rising by $31.2 million, or 3.6%[188]. - Depreciation increased by $2.3 million, or 5.7%, from 2024 to 2025, due to capital expenditures and net dealership acquisitions[190]. - Floor plan interest expense decreased by $7.6 million, or 15.5%, from 2024 to 2025, due to lower applicable rates and reduced inventory levels[191]. - Income taxes increased by $1.3 million, or 1.7%, from 2024 to 2025, despite a decrease in pre-tax income, with an effective tax rate of 26.9%[194]. Cash Flow and Dividends - Net cash provided by operating activities decreased to $851.9 million for the nine months ended September 30, 2025, from $962.1 million in 2024, a decline of $110.2 million[251][253]. - Cash dividends paid to stockholders increased to $252.7 million for the nine months ended September 30, 2025, compared to $194.7 million in 2024[260]. - The company announced a cash dividend of $1.38 per share, payable on December 2, 2025, reflecting a consistent dividend policy[238]. Market Conditions and Risks - The company has experienced higher rates of inflation affecting vehicle prices, parts costs, and employee wages, which may adversely impact consumer demand[272]. - The automotive retail and commercial vehicle industries are influenced by macro-economic conditions, including consumer confidence and discretionary spending levels[275]. - The company is subject to risks from tariffs and trade restrictions that may increase vehicle and parts costs, affecting gross profit[276]. - Changes in foreign currency exchange rates may materially and adversely impact the company's future results[283].

Core Insights - The individual has extensive experience in the energy industry, having worked for 22 years in various roles including engineering, planning, and financial analysis [1] - The investment strategy focuses on achieving returns that match the S&P 500 while maintaining lower volatility and higher income [1] - The approach emphasizes long-term holding of investments unless there is a compelling reason to sell, with a focus on intrinsic value [1] Investment Strategy - The individual manages a personal portfolio since 1998, aiming for total return maximization by purchasing assets when prices are low relative to their intrinsic value [1] - There is no specific preference for asset class, market cap, sector, or yield, indicating a broad investment approach [1] Position Disclosure - The individual holds a beneficial long position in the shares of PAG, indicating confidence in the stock's performance [2]

Financial Data and Key Metrics Changes - Q3 revenue was $7.7 billion, up 1% year-over-year [5] - EBITDA for Q3 was $292 million, with net income of $213 million and earnings per share of $3.23 [5] - Retail automotive same-store revenue increased by 5%, with service and parts revenue also up by 5% [5] - Total new vehicle gross per unit was impacted by a higher percentage of BEV sales, reducing gross by approximately $100 [6][8] - Free cash flow for the nine months ended September 30, 2025, was $625 million, with adjusted EBITDA of $1.1 billion [20] Business Line Data and Key Metrics Changes - U.S. automotive retail same-store new and used unit sales increased by 5%, with new units up 9% and used units up 1% [10] - Premier Truck Group same-store unit sales declined by 19% during Q3, with EBITDA down $15 million [9][12] - International revenue was $2.9 billion, with a 7% decline in same-store units delivered in the UK [15] - Used vehicle gross profit in the UK increased by 19%, contributing to an overall increase in used vehicle gross per unit [16] Market Data and Key Metrics Changes - In the U.S., same-store new units delivered increased by 9%, while revenue increased by nearly 10% [7] - The UK retail automotive market faced challenges due to a cyber incident at Jaguar Land Rover, impacting new vehicle deliveries [8][15] - The Class 8 market saw a 30% decline in orders and a 22% decline in retail sales during Q3 [12] Company Strategy and Development Direction - The company remains committed to its diversification strategy and has acquired a Ferrari dealership in Modena, Italy [23] - The focus on electric vehicle sales increased, with BEV sales making up over 10% of total sales in Q3 [6] - The company is adjusting its cost structure in response to macroeconomic challenges and is well-positioned for a market rebound [13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the diversified model's ability to adapt to market conditions [25] - The operating environment in the UK remains challenging due to inflation and interest rates, impacting consumer affordability [15] - Management anticipates a gradual recovery in the freight environment, with potential improvements in freight rates and capacity [51] Other Important Information - The company repaid $550 million of senior subordinated notes, reducing non-vehicle debt to $1.57 billion [21] - Total inventory was $4.7 billion, with retail automotive inventory down $9 million [23] - The company has $262 million remaining under the existing securities repurchase authorization [22] Q&A Session Summary Question: Clarification on Chinese brands and Sytner Select locations - Management confirmed the transition to Sytner Select involved reducing big-box retail stores to eight high-quality locations, with partnerships with Chinese brands like Chery and Geely [32][34] Question: Impact of tax deductions on Q4 demand - Management indicated that the tax deduction for depreciation would have an impact on Q4 demand, with production schedules filled for Q4 [38][40] Question: Visibility on recovery for Premier Truck Group - Management noted that freight rates have bottomed out and discussed potential capacity tightening due to regulatory changes affecting CDL drivers [49][50] Question: Growth in U.S. parts and service business - Management highlighted strong performance in customer pay and warranty services, driven by an aging vehicle fleet and operational efficiencies [54][56] Question: Trends in luxury vehicle sales and GPU - Management discussed the performance of luxury brands, particularly Jaguar Land Rover, and the impact of supply constraints on gross profit per unit [66][68]

Financial Data and Key Metrics Changes - Q3 revenue was $7.7 billion, up 1% year-over-year [4] - EBITDA for the quarter was $292 million, with net income of $213 million and earnings per share of $3.23 [4] - Retail automotive same-store revenue increased by 5%, with service and parts revenue also up by 5% [4] - The average discount from MSRP on BEVs sold in the U.S. was $7,100, impacting new vehicle gross per unit by approximately $100 [5][6] Business Line Data and Key Metrics Changes - U.S. retail automotive same-store new units delivered increased by 9%, with revenue up by $300 million, nearly 10% [5] - Premier Truck Group same-store unit sales declined by 19%, with EBITDA down by $15 million [7][12] - In the UK, same-store units delivered declined by 7%, with a significant impact from a cyber incident at Jaguar Land Rover [14] Market Data and Key Metrics Changes - The U.S. retail automotive business showed strong performance, while the UK faced challenges due to inflation and a cyber incident [5][14] - International revenue was $2.9 billion, with a 23% increase in revenue from operations in Italy, Germany, and Japan [16] - The Class 8 market saw a 30% decline in orders and a 22% decline in retail sales during Q3 [11] Company Strategy and Development Direction - The company remains committed to its diversification strategy and has acquired a Ferrari dealership in Modena, Italy [23] - The focus is on enhancing relationships with brands and driving efficiencies in operations [18][19] - The company is adjusting its cost structure in response to market conditions and preparing for a rebound in the freight environment [12][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the diversified model's ability to adapt to market conditions [25] - The freight environment is expected to improve as capacity tightens due to regulatory changes affecting CDL drivers [42] - The company anticipates a gradual recovery in the used vehicle market as lease returns increase [71] Other Important Information - The company generated $852 million in cash flow from operations for the nine months ended September 30, 2025 [19] - Total debt was $5.6 billion, with a significant portion related to floor plans [20] - The company has returned over $2.5 billion to shareholders through dividends and share repurchases over the last four years [22] Q&A Session Summary Question: Clarification on Chinese brands and Sytner Select - Management confirmed the transition to Sytner Select involved reducing inventory while improving quality, with partnerships established with Chinese brands like Chery and Geely [29][30] Question: Impact of tax deductions on demand - Management indicated that the tax deduction for depreciation would have a positive cash flow impact, with expectations for continued demand in Q4 [33][36] Question: Visibility on recovery in Premier Truck Group - Management noted that freight rates have likely bottomed out, with expectations for capacity tightening and improved freight rates in the future [42] Question: Trends in luxury vehicle sales - Management highlighted strong performance in premium luxury sales, with expectations for continued demand despite challenges from specific brands [55][56] Question: Used vehicle gross profit increase - Management attributed the increase in used vehicle gross profit primarily to the Sytner Select strategy and improved inventory management [70][71]