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On Monday, Citi analyst Michael Ward adjusted the price target for Penske Automotive Group (NYSE:PAG) to $195 from the previous $185, while reaffirming a Buy rating for the company’s shares. According to InvestingPro data, five analysts have recently revised their earnings estimates upward, with price targets ranging from $140 to $190. The revision reflects Penske’s limited exposure to potential tariff increases that could impact the Dealer Group sector. The company, currently valued at $11.02 billion, trades at a P/E ratio of 11.74.
Penske Automotive Group’s gross profit from new light vehicles and trucks represented 26% of the company’s total gross in 2024. With 40% of its operations based outside the United States, the actual exposure to tariff changes is approximately 16% of the company’s gross. This international diversification, combined with annual revenues of $30.6 billion, has helped the company maintain its GOOD financial health score according to InvestingPro’s comprehensive analysis, available in their detailed Pro Research Report.
Furthermore, Penske’s substantial involvement with import and luxury brands in the U.S. market suggests that only about half of its unit sales would be affected by any increase in tariffs. This limitation is expected to have a lesser impact on the company’s performance compared to others in the sector.
Adding to Penske’s financial robustness is its 28.9% stake in Penske Transportation Solutions, which contributes roughly $200 million in equity income. This investment is seen as a strength that bolsters the company’s financial position.
On May 13, Penske Automotive Group demonstrated its financial confidence by increasing its dividend for the 18th consecutive quarter. InvestingPro data reveals an impressive 44.83% dividend growth over the last twelve months, with the company maintaining dividend payments for 15 consecutive years. Additionally, the company expanded its share repurchase authorization, signaling its ability to navigate through tariff-related challenges while delivering shareholder value.
The decision by Citi to raise the price target to $195 is based on the expectation that the multiples for the Dealer Group will normalize, indicating a positive outlook for Penske Automotive Group amidst industry uncertainties.
In other recent news, Penske Automotive Group reported its financial results for the first quarter of 2025, achieving an adjusted earnings per share (EPS) of $3.39, which exceeded analysts’ expectations of $3.23. However, the company’s revenue fell short, reaching $7.6 billion compared to the forecasted $7.71 billion. Despite missing revenue expectations, Penske managed a 2% year-over-year revenue increase, marking a record for the company. Additionally, Penske Automotive announced a 3.3% increase in its quarterly dividend to $1.26 per share and expanded its securities repurchase authorization by $250 million, bringing the total authorization to $295.8 million. The company also highlighted that Battery Electric Vehicle (BEV) sales accounted for 8.5% of new vehicle sales in the quarter. Furthermore, Penske’s Board of Directors approved enhancements to its securities repurchase program, allowing for the repurchase of common stock or debt through various methods. Analysts have noted Penske’s strategic diversification and operational efficiency as key factors in its financial performance. These recent developments reflect Penske’s ongoing efforts to manage costs and navigate challenging market conditions.
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