Sign in

You're signed outSign in or to get full access.

PA

PENSKE AUTOMOTIVE GROUP, INC. (PAG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue rose 6% to $7.72B (quarterly record) and EPS increased 25% to $3.54; adjusted YoY EPS rose 3% versus Q4 2023 adjusted EPS of $3.45 .
  • Cost control improved materially: SG&A as a percentage of gross profit fell 70 bps YoY to 70.3% and 90 bps sequentially vs Q3 2024, supporting operating leverage despite mixed unit trends .
  • Retail service & parts remained the growth engine: revenue +13% to $770.5M and same‑store +7%, with gross margin up 30 bps; new GPU rose by $74 sequentially vs Q3, while used GPU strengthened YoY .
  • Commercial trucks (Premier Truck Group) softened YoY on unit timing and freight recession, though margin expanded 200 bps (total) and new truck GPU +21% YoY; equity earnings from Penske Transportation Solutions (PTS) were $52.3M in Q4; board raised the dividend to $1.22 (+2.5%)—the 17th consecutive increase .
  • No formal revenue/EPS guidance; management reiterated low‑70% SG&A-to-gross-profit framework, highlighted BEV discounting (~$6,900 below MSRP) and replacement‑driven Class 8 demand in 2025 as key narrative drivers .

What Went Well and What Went Wrong

What Went Well

  • Service & parts strength: revenue hit $770.5M (+13%), same‑store +7%, gross margin +30 bps; U.S. fixed absorption reached 87.5%, supported by 7% technician growth and a 6% increase in effective U.S. labor rate .
  • Cost discipline: SG&A as % of gross profit improved 70 bps YoY and 90 bps sequentially, with management citing streamlined advertising and lower service loaner maintenance as contributors .
  • New vehicle profitability resilience: average new GPU was $5,146, up $74 sequentially vs Q3; variable GPU per unit increased sequentially as mix leaned premium (77% overall, 95% in UK) .
  • Quote: “Revenue increased 6% to $7.7 billion, a quarterly record… SG&A as a percentage of gross profit decreased 70 basis points YoY and 90 basis points sequentially” — Roger Penske .

What Went Wrong

  • Used unit volume declined 6% YoY in Q4 (same‑store −5.6%), reflecting the transition from CarShop to Sytner Select (lower unit throughput), though used GPUs improved .
  • F&I pressure: retail automotive F&I gross profit fell 2.1% YoY in Q4; premium leasing recovery remains a multi‑year process limiting near‑term certified supply .
  • Commercial truck revenue down 14.5% YoY with retail units −18%; freight recession and lower gains on sale weighed on PTS; management expects ongoing interest expense headwinds as lower‑rate bonds roll to ~5% .
  • BEV discounting remains significant—average ~$6,900 below MSRP in U.S.; inventory mix pivoted down to ~11% BEVs vs 30–40% six months ago, but discounts still compress front‑end .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$7,272.1 $7,696.7 $7,590.8 $7,719.9
GAAP EPS ($)$2.84 $3.61 $3.39 $3.54
Adjusted EPS ($)$3.45 ——$3.54
Gross Profit Margin (%)16.3% 16.4% 16.4% 16.3%
SG&A as % of Gross Profit71.0% 70.2% 71.2% 70.3%
Operating Income Margin (%)3.7% 4.4% 4.2% 4.3%
Income Before Taxes Margin (%)3.5% 4.2% 4.0% 4.1%

Segment breakdown (Revenue and Gross Profit):

SegmentQ4 2023 Revenue ($MM)Q3 2024 Revenue ($MM)Q4 2024 Revenue ($MM)Q4 2023 GP ($MM)Q3 2024 GP ($MM)Q4 2024 GP ($MM)
Retail Automotive$6,177.9 $6,340.7 $6,722.1 $1,002.4 $1,041.5 $1,076.9
Retail Commercial Truck$904.8 $1,063.3 $773.7 $143.2 $157.1 $138.1
Commercial Vehicle Distribution & Other$189.4 $186.8 $224.1 $42.5 $44.6 $45.8
Total$7,272.1 $7,590.8 $7,719.9 $1,188.1 $1,243.2 $1,260.8

Selected KPIs:

KPIQ2 2024Q3 2024Q4 2024
New retail units (Auto)50,861 49,523 55,391
Used retail units (Auto)65,571 57,738 54,034
New GPU ($ per unit)$5,302 $5,072 $5,146
Used GPU ($ per unit)$1,822 $1,882 $1,797
Service & Parts Revenue ($MM)$752.8 $778.0 $770.5
Service & Parts Gross Margin (%)58.4% 57.8% 58.4%
SG&A as % of Gross Profit70.2% 71.2% 70.3%
Income Before Taxes ($MM)$325.5 $304.4 $315.2
New vehicle days’ supply (U.S.)52 53 41 (U.S.) / 49 total
Used vehicle days’ supply40 43 47

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SG&A as % of Gross ProfitFY 2025“Low 70s” maintained across recent quarters “Low 70s; ~70–71%” reiterated Maintained
Dividend per shareQ1 2025$1.19 (approved Oct 2024) $1.22 (+2.5%), payable Mar 6, 2025 Raised
Interest rate sensitivityFY 2025Not previously quantified±25 bps ≈ ±$11M interest expense impact New disclosure
Debt managementSep 2025 maturity—Expect repayment of $550M 3.5% notes via ops or credit facility Liquidity plan update
Segment narrative (PTG)2025–2027—2025 demand driven by replacement; 2027 emissions change may spur later prebuy; limited 2025 prebuy expected Qualitative outlook

Note: No formal numerical revenue/EPS guidance provided in documents .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
Service & Parts expansionRecord $753M; fixed margin resilience; sequential cost control improved SG&A to 70.2% Record $778M; same‑store +7% $770.5M; same‑store +7%; U.S. fixed absorption 87.5%; +7% technicians; labor rate +6% Structural strength continuing
SG&A disciplineSequential improvement by 50 bps (to 70.2%) SG&A at 71.2% of gross profit 70.3% (−70 bps YoY; −90 bps seq); reiterated low‑70% target Improving, guided to low‑70s
BEV inventory/discountsNot highlightedBEV inventory managed; broader unit impacts from CDK/connectivity issues BEV discounts ~$6.9K below MSRP; BEV inventory down to ~11% of mix (from 30–40% six months ago) Discounting persists; inventory mix improving
PTS freight cycle & gainsSequential equity earnings +63% vs Q1; rental utilization improved Sequential increase vs Q2; freight challenges remain Rental revenue −9%; gains on sale lower; interest cost headwind; PAG share $52.3M in Q4 Freight recession lingering; utilization focus
Commercial truck demandFlat units; replacement‑driven demand Retail units +14% YoY in Q3; margins mixed Retail units −18% YoY; total gross margin +200 bps; 2025 demand replacement‑driven; minimal 2025 prebuy expected Soft near‑term, margin resilience
UK used strategy—CarShop→Sytner Select transition (lower units) Used same‑store units −18%; used GPU +$542; focus on organic inventory (trades) Mix shift toward higher‑quality, lower‑volume
Capital allocationBuybacks/dividend increases; ongoing M&A $1.19 dividend; M&A pipeline; leverage 1.3x Dividend $1.22; ~$1.9B liquidity; ~$2.1B acquired in 2024; leverage 1.2x Balanced returns and inorganic growth

Management Commentary

  • Roger Penske: “Revenue increased 6% to $7.7 billion, a quarterly record… SG&A… decreased 70 bps YoY and 90 bps sequentially” .
  • Roger Penske on GPUs and mix: “Average new… gross profit per new vehicle retailed… increased sequentially by $74… variable gross profit per unit… up versus Q4 ’23… we’re about 77% premium” .
  • CFO Shelley Hulgrave on SG&A: “We’re still comfortable with that low 70s guidance… maintained it for the last 5 quarters… improvements quarter‑over‑quarter being down 90 basis points from Q3” .
  • Rich Shearing on BEVs: “In Q4, the average discount on a BEV from MSRP was nearly $6,900 per unit” .
  • Randall Seymore on UK: “Used vehicle same‑store gross profit increased $542 per unit… Service and Parts same‑store revenue increased 8.6%” .

Q&A Highlights

  • Capital allocation/M&A pacing: Target ~5% growth via acquisitions and ~5% organically; flexibility across geographies, trucks, and U.S. franchises; $150M remaining buyback authorization .
  • New auto inflection: Sequential improvement in front‑end GPU with premium mix and leasing recovery expected to aid used supply over time .
  • BEV strategy: Inventory mix pivoted lower (11% of premium/high‑premium BEV inventory) but discounts still meaningful ($6.8–$6.9K) .
  • SG&A guardrails: Low‑70% SG&A-to-gross-profit reiterated; focus on comp-to-gross, inventory controls, and tech-driven efficiency .
  • Commercial truck prebuy: Limited 2025 prebuy expected; regulatory clarity on 2027 standards to drive timing; freight recession prolongs capacity adjustment .
  • PTS outlook: Gains on sale headwinds and higher interest costs; utilization improvements prioritized; 2025 profitability expected around similar levels subject to rates and gains .
  • Affordability/credit: Premium mix and leasing mitigate negative equity exposure; subprime ~6% of business .

Estimates Context

  • S&P Global consensus estimates could not be retrieved due to provider daily limit; therefore, estimate‑based beat/miss analysis is unavailable at this time (consensus values not included) [Values retrieved from S&P Global were unavailable].
  • Implication: With record revenue and sequential GPU/SG&A improvement, sell‑side models may need to reflect stronger service & parts run‑rate, low‑70% SG&A, and continued BEV discounting headwinds; truck segment margins were better than volume, but freight cycle normalization remains the key swing factor .

Key Takeaways for Investors

  • Mix and margin resilience: Premium brand concentration and service & parts scale continue to anchor steady 16.3% gross margins and rising fixed absorption; sequential new GPU improvement is a constructive datapoint .
  • Cost control is a stock catalyst: Sustained low‑70% SG&A-to-gross-profit and sequential declines support EPS durability even amid unit volatility; watch for continued advertising and loaner maintenance efficiencies .
  • Trucks: Expect softer volumes near term but margin resiliency; freight recovery/utilization and 2027 emissions rule clarity are key catalysts for PTG and PTS .
  • BEV dynamics: Discounts compress GPUs, but inventory mix has normalized; Porsche and other OEM pivots to ICE/hybrid variants could ease pressure over time .
  • Capital deployment: Ongoing M&A (Australia Porsche expansion) and dividend growth (now $1.22) signal balanced returns; leverage 1.2x and ~$1.9B liquidity provide flexibility .
  • Near‑term trading: Positive reaction likely biased to cost discipline and service & parts strength; monitor freight indicators and OEM BEV pricing for potential headwinds/tailwinds .
  • Medium‑term thesis: Durable multi‑pillar model (premium auto, parts/service, trucks, PTS stake) plus disciplined SG&A and balanced capital returns underpin cash generation through cycles .

Appendix: Additional Data and Disclosures

  • PTS equity earnings: Q4 $52.3M; FY $198.0M .
  • Liquidity & leverage: ~$1.9B liquidity; leverage ratio 1.2x; debt/capitalization 26.2%; total floor plan notes $4.024B; cash $72.4M .
  • Dividend: $1.22 per share payable March 6, 2025; 17th consecutive quarterly increase .
  • Non‑GAAP: Q4 2023 goodwill impairment $40.7M (before/after tax) impacted EPS by $0.61; Q4 2024 adjusted EPS equals GAAP EPS .