A month has gone by since the last earnings report for Penske Automotive (PAG). Shares have lost about 2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Penske due for a breakout? Well, first let's take a quick look at the latest earnings report in order to get a better handle on the recent drivers for Penske Automotive Group, Inc. before we dive into how investors and analysts have reacted as of late.
Penske Q1 Earnings Top Expectations
Penske reported first-quarter 2026 adjusted earnings of $3.05 per share, which declined 15.0% year over year but topped the Zacks Consensus Estimate of $2.91 by 4.8%. Total revenues of $7.86 billion dipped 1.1% from the year-ago quarter and missed the consensus mark of $7.95 billion by 1.1%.
Despite softer revenues versus expectations, Penske’s Retail Automotive service and parts revenues rose 4.6% to $863.9 million, helping cushion a tougher comparison and challenging market conditions.
PAG Faces Weather and Mix Pressures in Retail Auto
In Retail Automotive, total new units delivered fell 9.9% year over year to 50,036, while used units slipped 0.6% to 60,126. Total retail units declined 5% to 110,162, reflecting a tougher demand backdrop in key markets.
Management cited U.S. weather-related disruptions early in the quarter, prior-year tariff-related pull-forward of retail sales, and softer U.S. electric-vehicle demand tied to regulatory easing and the expiration of tax credits as primary drags on new-vehicle volume.
Penske’s Pricing Holds Up as Used Revenues Rise
Even with lower new-vehicle volumes, the company posted higher used-vehicle revenues, which increased 7.3% year over year to $2.43 billion. New-vehicle revenues decreased 5.2% to $3.08 billion, while finance and insurance revenues were modestly lower at $202.3 million.
On profitability per unit, retail automotive gross profit per new vehicle (excluding agency) was $4,783, down 4.6% from the year-ago level, and used-vehicle gross profit per unit was $2,076, down 2.0%. Notably, agency units rose 21.8% to 13,011, and agency gross profit per unit improved 7.1% to $2,805, adding a steadier profit stream alongside traditional retail sales.
PAG’s Truck Segment Sees Lower Deliveries, Better Mix
Retail Commercial Truck results were pressured by lower deliveries, with total new and used units down 24% year over year to 3,583. Segment revenues decreased 15.7% to $694.6 million, and earnings before taxes fell to $36.4 million from $45.1 million a year ago.
Within the segment, service and parts provided relative stability. Service and parts revenues increased 4.6% to $232.2 million, and the segment’s total gross margin improved 140 basis points to 18.5%, even as gross profit per unit for new and used vehicles declined. Management also pointed to improving freight trends, noting industry reports showed a 91% increase in Class 8 market orders for the three months ended March 31, 2026, compared with the prior-year period.
PAG Benefits From Affiliate Earnings and Dealership Sale Gains
Below the operating line, equity in earnings of affiliates increased 22.5% year over year to $40.8 million. PAG’s equity income from its Penske Transportation Solutions investment was $41.1 million in the quarter.
The company also recorded a gain on the sale of a dealership of $60.4 million versus $52.3 million a year ago, supporting reported profitability. Income before income taxes was $323.7 million, down 7.6% year over year, while adjusted income before taxes was $276.3 million, reflecting the impact of excluded items in management’s operating view.
PAG Prioritizes M&A and Shareholder Returns
PAG continued active capital deployment during the quarter, completing acquisitions of Lexus of Orlando and Lexus of Winter Park, which are expected to add $450 million in estimated annualized revenues. Cash paid for acquisitions totaled $669.7 million, including $115 million for property and floor plans.
Shareholder returns remained in focus. The company paid $92.6 million in dividends and repurchased 170,393 shares for $26.4 million. Liquidity was approximately $1.3 billion, including $83.7 million in cash and $1.2 billion of availability under credit agreements and revolving mortgage facilities. Balance sheet leverage increased, with long-term debt rising to $2.21 billion as of March 31, 2026.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
VGM Scores
Currently, Penske has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. However, the stock has a score of B on the value side, putting it in the second quintile for value investors.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Interestingly, Penske has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Penske Automotive Group, Inc. (PAG): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).