Penske Automotive Group (NYSE:PAG) released first-quarter financial results and hosted an earnings call on Wednesday. Read the complete transcript below.
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The full earnings call is available at https://events.q4inc.com/attendee/833752648
Summary
Penske Automotive Group reported Q1 2026 revenue of $7.9 billion, with net income of $235 million and earnings per share of $3.56.
The company made strategic acquisitions of two Lexus dealerships expected to generate $2 billion in annual revenue and repurchased 170,000 shares of common stock.
Penske Automotive Group’s commercial truck segment saw a decline in unit sales due to tariffs and freight market weakness, but new truck orders are increasing, indicating a positive outlook for H2 2026.
Full Transcript
OPERATOR
Good afternoon. Welcome to the Penske Automotive Group from first quarter 2026 earnings conference call. Today’s call is being recorded and will be available for replay approximately one hour after completion through May 6, 2026 on the Company’s website under the Investors tab at www.penskeautomotive.com. I will now introduce Anthony Porten, the company’s Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.
Roger Penske (Chair and CEO)
Thank you, Krista. Good afternoon everyone and thank you for joining us today. A press release detailing Penske Automotive Group’s first quarter 2026 financial results was issued this morning and is posted on our website along with a presentation designed to assist you in understanding the company’s results. As always, I’m available by email or phone for any follow up questions you may have. Joining me for today’s call is Roger Penske, our Chair and CEO Shelly Hallgrave, our EVP and Chief Financial Officer, Rich Shearing from North American Operations, Randall Seymour of International Operations and Tony Piccione, our Vice President and Corporate Controller. We may make forward looking statements on today’s call about our earnings potential, outlook and other future events and we also may discuss certain non GAAP financial measures such as EBITDA and adjusted EBITDA. We’ve also prominently presented and reconciled any non GAAP measures for the most directly comparable GAAP measures in this morning’s press release and investor presentation, again both of which are available on our website. Our future results may vary from our expectations because of risks and uncertainties outlined in today’s press release. Under Forward looking statements, I direct you to our SEC filings, including our Form 10-K and previously filed Form 10-Qs for additional discussion and factors that could cause future results to differ materially from expectations. At this time, I’ll turn the call over to Roger Penske. Thank you Tony Good afternoon everyone and thank you for joining us today. We’re pleased to report a solid productive first quarter. During the first quarter, PAG delivered over 123,000 new and used vehicles and nearly 3,600 new and used commercial trucks and that generated approximately 7.9 billion in revenue. We earned 324 million in earnings before taxes and 235 million in net income and generated earnings per share of $3.56. The first quarter results include a $60 million gain on the sale of a dealership, partially offset by 13 million in certain disposals and other charges. As we continue to optimize our dealership portfolio. Excluding these items, adjusted earnings before taxes was 276 million. Net income was 201 and earnings per share was $3.05. This was a difficult comparison with the prior year period and challenging market conditions impacted year over year performance. We also continue to grow our footprint. In February we acquired two high performing and strategic Lexus dealerships in Orlando metropolitan area of Central Florida, one of the fastest growing regions in the U.S. these acquisitions complement the two Lexus and two Toyota dealerships we acquired in November 2025. Combined, these six dealerships are expected to generate 2 billion in estimated annualized revenue. We also repurchased 170,000 shares of common stock for 26 million. We increased the dividend to $1.40 which yields approximately 3.4%, the highest yield in our peer group. Looking at the details for the quarter, same store Retail Automotive new units declined 5% and used increased 1%. Units retailed were impacted by weather related challenges and a difficult comparison to March 2025 when tariffs caused pull ahead sales and lower BEV sales in the US Associated with the elimination of the BEV tax credit. Gross profit per unit new Unit retailed was $4,783 up $94 sequentially. Gross profit per used unit was $2,076 up $306 sequentially. Our service and parts revenue and gross Profit was a Q1 record. Same store revenue increased 4.6 and related gross profit increased 5.7%. Service and parts gross margin was up 60 basis points. The retail commercial truck segment Q1 unit sales declined 953 units driven by reduced order intake during Q3 and Q4 2025 following the implementation, implementation of tariffs and weakness in the freight market. However, we are encouraged today with the trends we are seeing across the commercial truck market. In recent months we’ve seen an increase in new truck orders. Expect the timing of these deliveries to take place in the second half of 2026. PTS equity income increased 24%. Growth in the full service leasing revenue, improved fleet utilization, lower operating and interest
Rich Sherry
expenses resulting from continued fleet reductions including maintenance and our depreciation were partially offset by continued challenges from the rental and lower gain on sale of trucks. At this time, I’ll turn the call over to Rich Sherry thank you Roger and good afternoon everyone In US Retail Automotive Same store new and used unit sales were affected by two major winter storms Liberation Day tariff announcement and pull forward of retail sales in March of last year and lower Battery Electric Vehicle (BEV) sales from easing emissions regulations and the elimination of the Battery Electric Vehicle (BEV) tax credit at the end of September 2025 during the quarter, 25% of new units sold were at MSRP compared to 29% in Q1 last year. Same store service and parts revenue increased 3.2% and gross profit increased 3.4%. Customer pay was up 4%, warranty was up 5% and collision repair declined 4%. Our US automotive technician count is up 3% when compared to the end of March of last year and our Bay utilization is 84%. Turning to Premier Truck Group Group during Q1, Premier Truck Group retailed 3,583 new and used trucks, generated 695 million in revenue and 128 million in gross profit on a sequential basis compared to Q4 2025. New unit gross increased $111 and used unit gross increased $4,624. New unit sales were down 26% and were in line with the overall North American Class 8 market. The recessionary freight environment and market uncertainty associated with tariffs and the status of emissions regulations impacted new truck in the last half of 2025. However, as Roger mentioned, in recent months we have seen an increase in new truck orders. In fact, Class 8 orders increased 91% and the industry backlog grew 33% to 175,000 units in the first quarter when compared to March of last year. We expect this increase in order activity to result in higher new unit sales in the second half of this year. Service and parts revenue increased 5% as average daily activity continues to grow and service backlog is beginning to increase. Service and parts gross profit represented 73% of segment gross profit during Q1. Turning to Penske Transportation Solutions, we are also encouraged by the stronger financial performance of Penske transportation solutions. During Q1, operating revenue declined 4% to $2.5 billion, lease revenue increased 2%, rental revenue declined 17% and logistics revenue declined 3%. PTS sold 9,319 units in Q1, ending the quarter with a fleet size of 387,500 units compared to 435,000 at the end of December 2024. Gain on sale declined by 26 million in Q1 26 compared to Q1 2025. As PTS continues to right size its fleet, higher fleet utilization, lower operating costs for maintenance, depreciation and interest expense contributed to an increase in earnings. Overall, our equity income from PTS increased 24% to $41 million. I would now like to turn the call over to Randall Seymour to discuss our international operations.
Randall Seymour
Thanks Rich. Good afternoon everyone. During Q1, international revenue was 3.3 billion which is up 6%. International new units were up 2% and used increased 3%. Same store service and parts revenue increased 7% as our strategies to increase customer pay drove a 10% increase which was more than offset the 3% decline in warranty. In the UK market. Q1 automotive registrations increased 6% to 615,000 driven by private and retail demand and an increase in Chinese OEM sales. While we were encouraged by Q1, the UK automotive environment remains challenging as inflation, higher taxes, consumer affordability and the government mandate towards electrification impacts the overall market. During Q1, our UK same store new units delivered were flat from lower sales of several German luxury brands and the elimination of the motability programs for these luxury brands. Same store used units increased 3% and gross profit per unit increased $500 sequentially when compared to Q4 2025 turning to Australia, our Earnings Before Tax (EBT) increased 15% compared to Q1 last year. In automotive our three Porsche dealerships in Melbourne continue to gain market traction through implementing our Porsche 1 ecosystem process. This process has driven higher customer satisfaction with all three dealerships in the top five including the top position nationally. Although we had a decline in new unit sales associated with the transition of the Macan to an all electric vehicle, we had a strong mix of higher end vehicles and our focus on pre owned and after sales continues to drive the business. In the Australian commercial vehicle and power system business we are diversified with revenue and gross profit split approximately 2/3 off highway and 1/3 on highway. The off highway business continues to grow. The current order book has exceeded our full year business plan with strength seen in energy solutions, mining and defence sectors. We have over 600 million Australian and secured orders so far for 2026. The engines and support we provide will be critical as this segment evolves. We continue to see the potential for our energy solutions business to generate at least 1 billion Aussie dollars in revenue by 2030. Over the last several years our focus has been to increase units in operation and to grow the recurring service, parts and remanufacturing aspects of our business. And this focus is starting to pay off. One of the major mining customers operates 125 megawatt power station with 20 Bergen engines that we installed four years ago. As part of the major maintenance interval we have begun to remanufacture 300 cylinder heads which will generate approximately 15,000 hours of work for our business. I would now like to turn the call over to Shelly Holgrave to review our cash flow, balance sheet and capital allocation.
Shelly Hulgrave
Thank you Randall. Good afternoon everyone. We remain committed to a strong balance sheet and a flexible and disciplined approach to capital allocation while driving our diversification strategy, implementing efficiencies and striving to lower cost. SG&A expenses increased by 1.5%, which is lower than the rate of inflation, while gross profit declined 1.7%. SG&A as a percentage of gross profit for Q1 2026 was 74.3%. Adjusted SG&A to gross profit was 73.3%. Q1 SG&A to growth was impacted by employee benefit costs up $4 million, payroll taxes and other UK social programs up 3.5 million, rent and real estate taxes up 7 million and lower automotive units and the impact from lower sales of new and used commercial vehicles at Premier Truck Group. During Q1 we generated $215 million in cash flow from operations and EBITDA of 397 million. During Q1 2026 we invested $63 million in capital expenditures. This is down from 85 million In Q1 2025 we completed acquisitions of two Lexus dealerships representing 450 million in estimated annualized revenue. We increased the cash dividend to $1.40 per share, representing the 21st consecutive quarterly increase on a forward basis. Our current dividend Yield is approximately 3.4% with a payout ratio of 39% over the last 12 months and we repurchased 170,000 shares of common stock for $26 million as of March 31, 2026, $221 million remained available for repurchases under our securities Repurchase Program program. Since the beginning of 2023, we have returned approximately $1.6 billion to shareholders through dividends and share repurchases. At the end of March, non vehicle long term debt was $2.6 billion and leverage was only 1.8 times. Despite completing several large acquisitions over the last six months, floor plan was 4.1 billion and and we had 425 million in vehicle equity for the quarter. Total interest expense increased $2 million. Floor plan interest decreased 4 million due to our cash management and lower interest rates, while other interest expense increased 6 million primarily from higher borrowings for acquisitions. We estimate a 25 basis point change in interest rates would impact interest expense by approximately $15 million. Our effective tax rate was 27.4% in Q1 2026, the prior year Results have been recast for the acquisition of Penske Motor Group using common control as disclosed last quarter. As a reminder, Penske Motor Group (PMG) was a partnership prior to our acquisition and was not subject to income tax Q1 2025 does not reflect federal or state income taxes. Had TMG been included in our taxable group. Therefore, period over period comparisons of net income and earnings per share may not be directly comparable. Due to the change in tax status of pmg, the impact to the effective tax rate would have been approximately 100 basis points and the impact to earnings per share would have been $0.05. Total inventory was 4.9 billion, up 77 million from December 2025. New vehicle inventory is at a 44 day supply including 46 days for premium and 29 days for volume. Forum used vehicle inventory is at a 39 day supply with the US at 33 days and the UK at 42 days. At the end of March we had 84 million in cash and liquidity of $1.2 billion. At this time. I will turn the call back to Roger for some final remarks.
Roger Penske (Chair and CEO)
Thank you Shelley. As mentioned, we added two Lexus dealerships to Penske Automotive Group (PAG) during the first quarter and today I’d like to welcome our new teams at Lexus of Orlando and Lexus of Winter Park to our organization. As I said earlier, we had a solid first quarter and I continue to remain optimistic about our business. New and used retail automotive grosses remain strong and service in parts continue to grow. Our diversification remains our key strength of our business model. The recovery in the commercial truck market is underway. We expect to increase new truck orders to benefit the second half of the year and our retail truck dealerships and PTS investment should benefit again today. Thanks for joining our call. We’ll take questions.
OPERATOR
Thank you. If you would like to ask a question, please press Star one on your telephone keypad to raise your hand and join the queue. And if you’d like to withdraw your question again, press Star one. Your first question comes from Michael Ward with Citigroup. Please go ahead
Michael Ward (Equity Analyst)
everybody. Thank you very much and good afternoon. I hope you all are doing well. Weather had a significant impact on the industry in January and February in the us. Can you quantify at all how much you were affected and were you able to get any of that back?
Rich Sherry
Hey Mike, this is Rich here. Good question. I mean as I mentioned in my prepared remarks, two significant storms, both one in January, one in February impacted. The first storm in January I think was almost 2,400 miles in, you know, it’s length and so it impacted our businesses from Texas all the way to the, to the Northeast. And so we had either delayed openings, multiple day closures, you know, as we had to deal with the cleanup. So February wasn’t as bad, but did impact pretty significantly the Northeast. Now the good news is obviously the competitors around us in those markets also suffered the same, same challenges. So we don’t think consumers were running to their dealerships to buy cars while we were struggling. But certainly from a fixed gross standpoint, you know, there was lost business there because that’s time you just can’t get back. So we had the added expense of the snow removal and then we attribute the fixed gross loss to about 4 to 5 million and then in total overall about a 6 million impact to our our earnings in Q1 as related to the weather.
Michael Ward (Equity Analyst)
Okay, thank you, Shelley. Shelley, you called out. …
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