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Investing.com -- JPM upgraded Penske Automotive Group (NYSE:PAG) to Neutral from Underweight on its improved fundamentals and limited tariff exposure. Brokerage says truck a more balanced tone on U.S. auto dealers following a modest sector pullback and solid Q2 results, saying near-term risks remain but downside has largely been priced in.
JP Morgan said Q2 earnings across the sector beat its above-consensus estimates by an average of 6%, helped by pre-tariff buying activity, easier comps due to last year’s CDK software outage, and strong performance in finance and insurance (F&I) income.
While new and used vehicle gross profit per unit (GPU) held up, F&I was the biggest positive surprise.
Despite the beats, shares have lagged, with auto dealer stocks down roughly 5% over the past two weeks.
JPM said current valuations at about 9x FY2 P/E reflect a more cautious stance on 2H growth, given ongoing pressure on GPUs, tougher comps in parts and service, and macro headwinds in the UK.
For PAG, JPM sees room for in-line or stronger growth into 2026 and highlighted upside from its under-leveraged balance sheet and bonus depreciation benefits tied to its truck leasing unit.
While PAG’s U.S. auto segment is among the most exposed to import tariffs, that exposure represents just 60% of its EBITDA, making it less vulnerable than peers.
JPM maintains a cautious stance on the sector overall, seeing limited multiple support until the full impact of tariffs is absorbed and comps normalize, likely by early 2026. It kept price targets largely unchanged but said risk-reward has evened out following recent declines.