With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

Industries included in the sector are automotive retail, general merchandisers, internet retail, and specialty retail.

Fortune Sector Leaders: Retailing

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

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The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

This year’s Fortune 500 marks the 68th running of the list.

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This year’s Fortune 500 marks the 67th running of the list.

F500-2021-143-Penske

Penske Automotive Group runs truck dealerships—both automotive and commercial—throughout North America and Western Europe. In 2021, the company reported the highest first quarter revenue, income from continuing operations, and earnings per share in company history. In April, Penske announced that it had completed its acquisition of Kansas City Freightliner, a retailer of medium- and heavy-duty commercial trucks.

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-136-Penske-Automotive-Group

A diversified transportation service company with multiple business segments, including new and used retail automotive, retail commercial truck dealerships, as well as distribution of commercial vehicle and power systems.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

This year's Fortune 500 marks the 63rd running of the list.

This year's Fortune 500 marks the 62nd running of the list.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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Penske Automotive Group is a transportation services company that operates automotive and commercial truck dealerships under franchise agreements with automotive manufacturers and distributors. The company also sells new and used vehicles; offers maintenance and repair services; and sells or places third-party finance and insurance products; third-party extended service and maintenance contracts; replacement and aftermarket automotive products; collision repair services; and wholesale parts. The company was founded in 1969 and is based in Bloomfield Hills, Mich.

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Penske Automotive Group (PAG): Company Profile, Stock Price, News, Rankings

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Penske Automotive Group

penske automotive group

Good afternoon. Welcome to the Penske Automotive Group 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 6th, 2026 on the company's website under the Investors tab at www.penskeautomotive.com. I will now introduce Anthony Pordon, the company's Executive Vice President of Investor Relations and Corporate Development. Sir, please go ahead.

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, Shelley Hulgrave, our EVP and Chief Financial Officer, Rich Shearing from North American Operations, Randall Seymore of International Operations, and Tony Piccioni, 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-Q 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 and 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. 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 million, and Earnings Per Share was $3.05. This was a difficult comparison for 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 U.S. 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.

In the retail commercial truck segment, Q1 unit sales declined 953 units, driven by reduced order intake during Q3 and Q4 2025 following the implication of tariffs and weakness in the freight market. 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 expenses resulting from continued fleet reductions, including maintenance in our depreciation, were partially offset by continued challenges in the rental and lower gain on sale of trucks. At this time, we'll turn the call over to Rich Shearing.

Thank you, Roger. Good afternoon, everyone. In U.S. 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 BEV sales from easing emissions regulations and the elimination of the 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 U.S. 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, during Q1, Premier Truck 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 orders during the last half of 2025. 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 Q1 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 2026 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 Seymore to discuss our international operations.

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 U.K. 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 U.K. automotive environment remains challenging as inflation, higher taxes, consumer affordability, and the government mandate towards electrification impacts the overall market. During Q1, our U.K. 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%. Gross profit per unit increased $500 sequentially when compared to Q4 2025. Turning to Australia, our 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 One 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. 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 defense sectors. We have over AUD 600 million in 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 AUD 1 billion in revenue by 2030. Over the last several years, our focus has been to increase units in operation to grow the recurring service, parts, and remanufacturing aspects of our business. This focus is starting to pay off. One of the major mining customers operates a 125 MW 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 caller over to Shelley Hulgrave to review our cash flow, balance sheet, and capital allocation.

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 costs. 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 U.K. 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. We repurchased 170,000 shares of common stock for $26 million. As of March 31st, 2026, $221 million remained available for repurchases under our securities repurchase 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 1.8x, despite completing several large acquisitions over the last six months. Floor plan was $4.1 billion, 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, 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 PMG 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 foreign.

Used vehicle inventory is at a 39-day supply, with the U.S. at 33 days and the U.K. 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.

Thank you, Shelley. As mentioned, we added two Lexus dealerships to PAG during the first quarter. 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. I continue to remain optimistic about our business. New and used retail automotive grosses remain strong. Service and parts continue to grow. Our diversification remains our key strength of our business model. The recovery in the commercial truck market is underway. 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 will take questions.

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. If you'd like to withdraw your question, again, press star one. Your first question comes from Michael Ward with Citigroup. Please go ahead.

Thank you. Hey, everybody. Thank you very much. Good afternoon. I hope you all are doing well. Weather had a significant impact on the industry in January and February in the U.S. Can you quantify at all how much you were affected, and were you able to get any of that back?

Hey, Mike. This is Richard. Good question. I mean, as I mentioned in my prepared remarks, two significant storms, both, you know, one in January, one in February, impacted. The first storm in January I think was almost 2,400mi in, you know, its length.

It impacted our businesses from Texas all the way to the Northeast. We had either delayed openings, multiple-day closures, you know, as we had to deal with the cleanup. 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, you know, suffered the same challenges. We don't think consumers were running to their dealerships to buy cars while we were struggling. Certainly from a fixed growth standpoint, you know, there was lost business there, 'cause that's time you just can't get back. We had the added expense of the snow removal, and then we attribute the fixed gross loss to about $4 million-$5 million.

In total overall, about a $6 million impact to our earnings in Q1.

Okay. Thank you. Shelley, you called out. I don't know if you were calling out or just the cost on the SG&A side of $15 million. It sounds like some of those will be recurring, I guess the rent and the health in the U.K. What? Are those one-time in nature? Are they now recurring? What were you kind of alluding to with that?

Hey, Mike. Yeah, a little bit of both. Certainly, you know, rent increases we see year-over-year. You know, health benefit plans, we certainly hope those costs go down, but that doesn't seem to be the trend. I wanted to highlight the fact that the U.K. social programs, this is the last quarter before we anniversary those, so it's a bit, you know, incomparable compared to Q1 of 2025. Like I said, we'll see that anniversary here in Q2.

Okay, that's about 30 basis points-40 basis points, right? It's approximately?

without those, that our SG&A to growth would be in that 71%-72% range that we had talked about. you know.

Okay. Thank you. Just lastly, it looks like you've been doing some portfolio rebalancing. If, usually you don't see much movement in the retail automotive revenue mix, but you see a couple of good changes year-over-year. I'm just wondering if that's a trend we can look to more. Are those gonna be your focus brands, continue to focus on the luxury and the volume foreign, that's the strategy, correct?

Well, Mike, let me say this. We actually sat with our board probably 18 months ago to determine what was gonna be our strategy on brands, locations, not only domestically, but internationally. We felt that we would look at our low performers, and then we looked at what were the expectations of the manufacturer from a CapEx perspective, and then what could we grow that business? We determined there were probably a number of locations that we would need to sell in order to get a return that we would want on top of that. Because of our commitment to go forward with Penske Motor Group, we had to commit to sell two Lexus stores, one in Warwick, and one in Madison, Wisconsin, which we completed.

Obviously, that gave us the opportunity to buy the Orlando stores and the PMG stores. Along with that, we took out a number of other smaller locations, some larger, some in the U.K., and that generate about $325 million-$350 million worth of free cash flow back on these stores, which we sold. Which obviously we used some of that money to pay to buy these other key stores that we're going forward with. We'll continue to prune the portfolio. We're still in the acquisition business. I think we made the decision in the U.K. to reduce our number of Sytner Select stores from 14 to six, which is paying off. We're taking those locations and adding the Chinese brands in the same showroom.

Overall, I think the strategy has worked, and we've kept our leverage, as Shelley said, from around 1.5 to 1.8. Am I right?

I think it's been a good move, and we'll continue. I think I see our peers doing the same thing, because today.

The cost of doing business is so high, and some of these smaller locations with all the controls you need and the high cost of the best people, we just can't see the numbers give us the returns we want. All of us are obviously looking for locations, at least we are, where we can add on in key markets.

Mike, this is Tony. Just page nine of our earnings presentation is a key chart in the deck.

... what our total revenue mix is, right? You can see there in particular, premium 72%, volume non-U.S. is 22%. When you look at the Toyota, the Toyota Lexus number, it has jumped up to 18% of our overall business from an automotive standpoint.

with the acquisitions and the OEM presence that we have.

Yeah. Yeah. Proactive plan. Looks like you're just pulling it off. Thank you very much. Appreciate it, everybody.

Your next question comes from the line of Rajat Gupta with JPMorgan. Please go ahead.

Thanks for taking the question. Hey, Roger. Hey, everyone. Just wanted to follow up on PTL on, you know, pretty nice earnings growth, you know, in the quarter despite the lower gain on sale. Obviously a lot of those improvements are coming from just lower maintenance, debt, you know, fleet costs, et cetera. I'm curious how we should think about the trajectory of PTL earnings for the remainder of the year. Any kind of guardrails you can give us for the full-year?

I think number one, we've come from roughly 430,000 units de-fleeted to 387,000 at the end of the quarter. That's obviously reduced a significant interest cost in our depreciation. It's been impacted positively with that. The good news is that our fleet utilization on the rental side, which were before we were down to 71%, it's now moved up to 76%. I think we've seen that the operating side of our business has been excellent during the quarter and really in Q4 also, because our gain on sale obviously has been down $26 million in the quarter.

we are able to pick that back up through utilization, through lease revenue and some of our logistics businesses, which provided an overall pickup in our profit, their profit from $120 million to $142 million. We've got lower operating expenses, obviously, as I'd mentioned, maintenance, depreciation, et cetera. It's operations. I think you'd think about interest, depreciation, gain on sale is down, but still higher than it was a year ago. we're seeing rental utilization up about 500 basis points.

Got it. I mean, it looks like a lot of these trends are sustainable, like at least from like a cost and earnings perspective, you know, through the remainder of the year, on a year-over-year basis.

I was trying to say that a lot of these trends seem sustainable through the remainder of the year, you know, at least from the cost side, you know, when you look at the year-over-year trend.

We're continuing. We probably have another 3,000 or 4,000 units that we'll take out easily during this year from a fleet perspective. We'll continue to grow. Also, we're seeing with the revenue coming back on rental, we can take some of our off-lease equipment and replace that at that point. I think the older trucks are out now, which were providing much higher maintenance. We're seeing that maintenance and tire maintenance much, much better. I think that the customer acceptance, this is a key one for you. We're starting to see people signing up for long-term leases. Say there was a pause over the last 90 to 120 days with emissions, with costs, et cetera.

We weren't getting the traction. Q1, we saw our lease signings going up, which bodes well for us for the future because these leases are three, four, five years with economic escalators.

Got it. Just to follow up on the parts and service business, more on the international side, pretty strong numbers overall. But it looks like if you look at it, excluding the FX benefit, you know, growth was probably flat to slightly up. I'm curious as to sort of if that's correct and, you know, what kind of initiatives are in place to maybe accelerate that growth going forward? Thanks.

Hey, Rajat, it's Randall. If you take the FX out, that's correct. In the U.K., we were slightly up. In, as an example, Italy, we were up 11%, Germany up 20%. It's really on the back of customer pay focus because warranty's actually down. Remember, internationally, we don't get the markup on parts like we do here in the U.S. You only get 10% margin where on warranty on the parts, whereas customer pay, it's the same. It's the mix and the focus on customer pay that's driving it, you know, with the higher margin business.

Got it. What portions of international is U.K. versus non-U.K. in your numbers there?

I meant like just mix of services, just mix of your business, in terms of contribution, in UK and non-UK.

Rajat, I'll get that back to you, offline after the call.

Understood. Okay, great. Thanks. Thanks for all the color and good luck.

Your next question comes from the line of Jeff Lick with Stephens. Please go ahead.

Good afternoon. Thanks for taking my question. Hey, Roger, how are you?

A question for Rich. Rich, you know, as we get into this part of the year, kind of, you know, April through the rest of the year, you know, lapping against last year. You know, last year at this time, luxury started to lag, you know, the broader auto sector and, you know, with the exception of April and, I mean, of August and September with the EVs. Just kind of curious how you're seeing things now as the year plays out, you know, 'cause you guys, you know, are a bit unique in that you have easier compares. Just kind of curious, you know, how you're thinking about, you know, the rest of the year on the new luxury, then maybe also talk about as we lap the EVs compare, what? Anything to think about there.

Yeah. I'll touch on the last comment you made relative to EVs. If you look Q1 this year versus Q1 of 2025, our EV sales were down 61% this year compared to last year. Certainly, you know, out in our West Coast and California, there's still a certain level of demand for the BEVs. The consumer out there, we haven't completely replaced that with hybrids or ICE. That was a tough, you know, compare year-over-year. We thought that the Iran conflict would drive some near-term or short-term demand in BEVs that we just haven't seen materialize. That escalation in fuel prices hasn't overcome the consumer's concerns about, you know, battery electric vehicles, either from a range or infrastructure charging perspective.

I don't see really a material change occurring in BEVs the balance of this year. You know, I think it's kind of stabilized post the tax credit going away in that 4% to 5% of the overall, you know, retail sales market. Coming back to the luxuries, you mentioned, or someone did earlier, the tough compare, certainly in March, you know, we were to SAR 17.6 million, April was at SAR 17 million. We've got some tough comps year-over-year. You know, you look at the premium luxury market, you know, certainly the sales are a little bit down in those brands.

If I look at, you know, Audi in Q1 was down about 30% overall as they're, you know, launching some new models that need to come into the marketplace. BMW about 15%. You know, Porsche with the Macan going away, we knew that this year, next year until they relaunch, that model will be a little more challenging, so we're down about 18% with them. Mercedes, you know, about the same as BMW, down about 15% overall. The good news that I would say is that the OEMs have now adjusted to the, you know, what the tariff impact is gonna be on their business. You know, certainly I think they were holding back money on incentives and programs, certainly in the latter half of last year.

I'd say they're back in the market. I wouldn't say the incentives are great, but they're good. You know, and the products they're producing are still very desirable. We, you know, we attend these, you know, annual dealer meetings, and every single one of them has a bevy of new products that are gonna be launching in the market this year that I think are gonna be highly desirable. I think from a model mix and brand mix, you know, with our 72% premium luxury, we're still in a good position there.

Anything to call out with service and parts with respect to warranty, that you're lapping stop sales at, especially on the luxury side?

You know, our fixed gross overall was up about 3.5%. We talked about the impact from the storms. You know, an encouraging nugget in there is our customer pay ROs. You know, we talked about that last couple calls. We've been really focused on that segment too. You know, the recalls, they continue to happen. If you look at Toyota, they increased the Tundra recall on engines to the 2023 and 2024 model year units. BMW's got a starter recall that was recently announced. Audi on their three-litre engine, you know, has piston replacements, which is about 30-hour job. We're doing a proactive software campaign too on the Q5 product. Look, I know the OEMs would prefer not to have these recalls, they continue to have quality leakage into the marketplace.

Excellent. Well, thanks very much and best of luck in 2Q. Take care, Roger.

Your next question comes from the line of John Babcock with Barclays. Please go ahead.

Hey. Good afternoon. Thanks for taking my questions. Just a quick one on the truck market. I know you're expecting an increase in truck orders, particularly in the second half. Just curious on the sustainability risk. I mean, I'm sure there's probably a portion of the truck demand that's probably driven by expectations for higher prices, you know, with some of the regulatory changes. I'm just kind of curious if you think this is something that, you know, you think is long-term sustainable truck demand, or if this is something that you think is temporarily driven by some of the short-term factors like regulations.

I certainly think there is some short-term influence on the truck orders, similar to what we saw with lack of truck orders in Q3, Q4. Last year, John, I think once there was some finality on what the EPA 2027 guidelines were going to look like, and customers could understand what the rule set was going to be, you know, that's what drove the order intake here in the first part of this year is Roger quoted up 91% on Class 8. I also think, you know, we had a near-term bump in particular for Premier Truck Group with tariff announcements in February. There was a grace period that was granted to customers that if they placed orders by the end of, by the beginning of March, they could avoid that tariff price increase, which was between $1,000 and $1,500, depending on heavy duty or medium duty.

There's some things structurally that I think have been going on that we've talked about, you know, for the last 18 months with the administration, right? The Department of Transportation and FMCSA have really been cracking down on illegal carriers and non-domiciled CDL holders, that has had an effect of tightening capacity. You see that in the spot rates up 30%-40% year-over-year, that's driving higher utilization of the legal operators on the road. We're seeing that manifest itself in our parts and service revenue up just over 4% in that business. That's the first time in six quarters that we've seen growth in our, you know, our fixed gross profit there.

When you look at the freight rates increasing, we're seeing that drive near term used truck demand as well. Our volume sales are trending upward there and our gross profit, as you saw in the quarter, was up almost $4,000. I think if you follow any of the publics, you know, J.B. Hunt, Covenant Transport that have reported, they would reiterate that they feel that the changes are structural and not temporary in nature.

All right. Thanks for that all that color. Now just on the M&A side of things, you know, you've increased exposure, you know, to Texas, Toyota and Lexus recently. As, you know, on a go-forward basis, you know, should we think about expanding brands? Are there certain geographies you want to tack on to? Also, how are you balancing that with leverage and, you know, what's your comfort level of leverage right now?

I think our leverage gives us all sorts of opportunity, point number one. Point number two, we're sitting with 70%-plus premium luxury and 21% or 22% volume foreign. We're focusing obviously on the mix of that, our business in those particular areas, probably more critically and looking for opportunities. I think our goal obviously is to maintain, as Shelley said, our dividend, you know, our buyback and our CapEx. We think by eliminating some of the stores that we have allowed us to reduce our CapEx hopefully by $100 million this year, that's going to give us the opportunity to continue to focus. I would say internationally, we've also done some pruning of our businesses there.

I think at the end of the day, you know, we're focusing on investments in Australia, in the defense area, in the power system and power generation. Obviously the returns that we're getting from Premier Truck Group, their Freightliner business, they're market share leaders, and we'd be looking for other locations, you know, in the U.S. and Canada, to represent them as those have been turned out to be quite good. I think what's key is we'll look right now, like the stores we did in Orlando, the right brand, certainly the right location and profitability. I think we have, we have the luxury of not being in a hurry.

When you put $2 billion of revenue on, now we've got to continue to integrate those into our company, which I think we're doing well and we'll again look for ones with a brand. Look at Toyota and Lexus right now. The lowest day supply of the industry. Are we talking under 20 days when you think about it? Some of the Lexus stores under 10, and they could continue to keep the product tight. That to me is gonna be critical. They're saying that's the way they're gonna operate in the future. We're getting some of that already also. When you look at Land Rover, you look at Porsche, and our business is down not because we're down, it's because of supply of the vehicles we want, and that's being impacted by tariffs, et cetera.

We're going to be cautious. There will be people that are confused out there that own these businesses, some of the smaller operators. If they're contiguous to our circles, you know, we're going to pounce all over those if we can. That's a long answer. I'm sorry.

Yeah. No, thanks. That's perfect. Appreciate it.

Your next question comes from the line of Mike Albanese with StoneX. Please go ahead.

Yeah. Hey, guys. Thanks for taking my question. Could you guys just comment on what you saw in Q1 regarding Chinese models and taking share in international markets? You know, is there a house view on how you think about the implications to premium luxury? And I mean, do you think about leaning into, you know, building exposure with these models or just kinda continue to take it slow and monitor? Thanks.

Penske Automotive Group (PAG) Q1 2026 Earnings Call Transcript

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