Penske Ends 2022 With a Record Quarter Despite Foreign-Exchange Headwind

Penske Automotive Group finished 2022 with record fourth-quarter EPS. Despite foreign-exchange headwinds taking $0.09 off EPS from continuing operations, EPS rose 6% year over year to $4.21 and beat the Refinitiv consensus of $3.95. We are leaving our fair value estimate in place but we will revisit all modeling assumptions after the 10-K is filed. We see the company well positioned for 2023 whether the U.S. has a recession. The firm's liquidity is solid at over $1.1 billion and debt/EBITDA remains below 1 times at 0.8. Management continues to reward shareholders via both dividends and buybacks while many of the other five public franchise dealers focus more on buybacks. The quarterly dividend increased 7% on Jan. 25 to $0.61, about a 1.8% annual yield as of Feb. 8, and tends to increase every quarter. Share repurchases totaled $886.5 million in 2022 for 8.2 million shares, or about 11% of shares at the start of the year. 2022 annual acquired revenue of $1.3 billion, although not small, could certainly be higher should management want it to be, but the firm remains disciplined on how much it will pay.