Penske Earnings: Record Revenue and Strong Service Growth Combat New and Used Headwinds

Penske Automotive Group had a good second quarter with diluted earnings per share of $3.61 (beating the LSEG consensus of $3.39) and revenue up 3.1% year over year to a quarterly record $7.7 billion. We are raising our fair value estimate to $148 from $142 on the time value of money and a slightly less long-term investment rate. Management has terminated the CarShop stand-alone used vehicle brand in the United Kingdom (but not in the United States) and rebranded the UK stores as Sytner Select, which may mean less capital investment over time. Sytner is a leading UK dealer group that Penske acquired in 2002. The cyberattack on dealer management system vendor CDK that started June 19 was an immaterial headwind for Penske because it only uses CDK in the truck dealer segment.