• Revenue: Increased 3% to $30.5 billion for 2024; Q4 revenue increased 6% to $7.7 billion.
• Net Income: $919 million for 2024; Q4 net income of $236 million, up 24% year-over-year.
• Earnings Per Share (EPS): $13.74 for 2024; Q4 EPS of $3.54, up 25% year-over-year.
• Gross Margin: 16.3% for Q4, consistent for six consecutive quarters.
• EBITDA: $1.49 billion for 2024.
• Income Before Taxes: $1.24 billion for 2024; Q4 income before taxes of $315 million, up 23% year-over-year.
• Same-Store Sales: Service and parts revenue increased 7% on a same-store basis in Q4.
• New Vehicle Transaction Price: Increased 5% to $60,288 in Q4.
• Gross Profit Per New Vehicle Retail: $5,146 in Q4, increased sequentially by $74.
• Used Units: Declined 6% in Q4; excluding Sytner Select, used vehicles retail would have increased 8%.
• Service and Parts Revenue: Increased 13% to $771 million in Q4.
• Dividend: Increased by $0.03 per share to $1.22 per share, marking the 17th consecutive increase.
• Cash Flow from Operations: $1.2 billion for 2024.
• Free Cash Flow: $811 million for 2024.
• Acquisitions: Completed acquisitions representing $2.1 billion in estimated annualized revenues in 2024.
• Non-Vehicle Long-Term Debt: $1.852 billion at the end of December 2024.
• Inventory: Total inventory was $4.6 billion at the end of December 2024.
• Floor Plan Debt: $4 billion at the end of December 2024.

• Warning! GuruFocus has detected 2 Warning Sign with PAG.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Penske Automotive Group Inc (NYSE:PAG) reported a 6% increase in revenue for the fourth quarter, reaching a record $7.7 billion.
• The company announced its 17th consecutive increase in quarterly dividends, reflecting strong shareholder returns.
• PAG's service and parts revenue increased by 13% in the fourth quarter, highlighting growth in a key business segment.
• The company completed acquisitions worth $2.1 billion in annualized revenue, expanding its operations in the US, UK, and Australia.
• PAG maintained a strong balance sheet with a debt capitalization ratio of 26.2% and leverage of 1.2 times, indicating financial stability.

Negative Points

• Used vehicle retail units declined by 6% in the fourth quarter, partly due to the transition of UK CarShop locations to Sytner Select.
• The retail commercial truck business experienced an 18% decline in unit sales compared to the previous year, attributed to supply shortages and delivery timing.
• Rental revenue in Penske Transportation Solutions declined by 9% due to the ongoing freight recession impacting rental utilization.
• The company faces headwinds from higher interest costs and a decline in gain on sale, impacting overall profitability.
• PAG's inventory of new battery electric vehicles in the U.S. remains high at a 76-day supply, indicating potential challenges in aligning with customer demand.

Q & A Highlights

Q: Has anything changed in your capital allocation strategy, especially considering the current acquisition opportunities? A: Michelle Hulgrave, CFO, stated that the company aims to grow 5% through acquisitions and 5% internally. They acquired $2.1 billion in annualized revenue this year and will continue to explore opportunities across all business areas, including international markets and trucks. They also prioritize returning capital to shareholders, with $150 million authorized for share repurchases.

Q: Are we seeing an inflection point in the auto business, particularly with new auto sales? A: Roger Penske, CEO, noted that their brand mix, which is heavily premium, helps maintain strong growth. While there might be some deterioration, they expect strong gross profit to continue, aided by leasing and used car sales. Interest rates and captive finance companies' activities also support growth.

Q: How do you see the impact of BEVs on your business, and are automakers adjusting their BEV deliveries? A: Roger Penske mentioned that BEV inventories have decreased from 30-40% to about 11%, aligning more with demand. Discounts on BEVs are about $6,800 less than ICE vehicles, but adjustments by automakers are helping balance inventory.

Q: What are your expectations for commercial truck demand in 2025, considering potential pre-buying before 2027 emissions changes? A: Richard Shearing, COO of North American Operations, explained that while there is some uncertainty due to potential regulatory changes, significant pre-buying is not expected in 2025. The freight recession and excess capacity are also factors tempering demand.

Q: How should we think about SG&A improvements in 2025? A: Michelle Hulgrave highlighted efforts to control costs and improve margins. They achieved a 70 basis point improvement in SG&A as a percentage of gross profit this quarter. For 2025, they expect to maintain SG&A in the low 70% range, focusing on inventory controls and compensation balance.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.