Penske Automotive (US:PAG)2022-10-26 21:38Financial Data and Key Metrics Changes - Revenue increased 7% to $6.9 billion, while EBT decreased 2% to $467 million and net income declined 4% to $340 million, with earnings per share increasing 3% to $4.61 [8] - Excluding foreign exchange impacts, revenue increased 12% to $7.3 billion, EBT increased 1% to $481 million, net income decreased 1% to $351 million, and earnings per share increased 7% to $4.75 [9] - Year-to-date EBITDA reached $1.6 billion, a 21% increase compared to the same period last year, with trailing 12-month EBITDA at $2.1 billion [19] Business Line Data and Key Metrics Changes - Retail Automotive operations saw new units decline 6% due to supply constraints, while used units declined 11% due to challenges in acquiring affordable inventory [10][11] - Retail automotive revenue declined 3%, but increased 4% when excluding FX, with variable gross profit per unit increasing $70 to $5,830 [12] - CarShop unit sales were 16,400 with revenue of $380 million, but profitability was impacted by vehicle acquisition prices and reconditioning costs [13] - Retail Commercial Truck dealership business saw total unit sales increase 25% to 6,031, with revenue increasing 42% to $1 billion and gross profit increasing 21% to $140 million [14] Market Data and Key Metrics Changes - In the U.K., the forward order bank is over 60% higher than the previous year, representing 36,000 units and $101 million in gross profit [11] - Penske Transportation Solutions (PTS) revenue increased 19% to $3.5 billion, with profit increasing 15% to a record $468 million [17] Company Strategy and Development Direction - The company is focused on operational efficiencies and has implemented AI to improve customer interactions and streamline processes [27][90] - Sustainability initiatives include building infrastructure for electric vehicles and installing over 1,500 charging stations [30] - The company plans to maintain a balanced capital allocation strategy, focusing on growth and shareholder returns [96] Management's Comments on Operating Environment and Future Outlook - Management expects supply constraints to persist for the next 9 to 12 months, but demand for new vehicles remains strong [11] - The company is confident in its diversified business model and ability to manage macro challenges [25] - Management remains optimistic about the premium luxury market, with strong pre-orders and minimal cancellations [52] Other Important Information - The company repurchased 2.8 million shares for $309 million in Q3, with a total of $675 million in share repurchases year-to-date [21] - The quarterly dividend was increased by 24% to $0.57 per share, with $114 million paid in dividends through September 30 [22] Q&A Session All Questions and Answers Question: What is the outlook on new vehicle grosses? - Management indicated that new vehicle grosses have remained high due to tight inventory and strong demand, with expectations for this to continue for the next 6 to 12 months [35][40] Question: How does the company view the used vehicle market? - Management acknowledged challenges in the used vehicle market due to a shortage of affordable inventory and indicated a focus on technology to improve customer engagement and sales [41][47] Question: Can you discuss the recent acquisition in the U.K.? - The acquisition of five Mercedes-Benz dealerships and three service centers is expected to generate $550 million in revenue and fits well within the company's existing operations [57][60] Question: What are the risks associated with proposed F&I legislation? - Management supports the elimination of unfair practices but noted uncertainty regarding the impact of proposed rules on the business [73][75] Question: What is the current state of SG&A and productivity? - SG&A is expected to normalize between 70% and 72%, with improvements in sales force productivity driven by AI and automation initiatives [81][83]