UPDATE: KeyBanc Capital Markets Upgrades Penske Automotive Group to Buy, Names $36 PT

In a report published Wednesday, KeyBanc Capital Markets upgraded its rating on Penske Automotive Group

from Hold to Buy, and named a $36.00 price target. KeyBanc Capital Markets noted, “[we are] driven by a bullish outlook on the industry for the following reasons: 1) we are incrementally more confident on the U.S. light vehicle SAAR and UK light vehicle sales outlook (PAG roughly 40% and GPI about 8% exposure) supported by fundamentals (i.e., pent-up demand, steady economic growth, new product offerings, etc.); 2) we are now bullish on the acquisitions outlook, driven by a more stable political and economic environment and supported by recent activity in the industry, which is particularly beneficial to GPI and LAD as acquisitions are highly accretive to their bottom line; 3) we are bullish on the automotive retail space going into 4Q12 earnings supported by our survey results, which indicate flat to increasing gross profit per unit in new, used, and F&I segments in a growing revenue environment, and a stable gross profit margin in P&S segment despite revenue headwinds; 4) free cash flow generation should remain strong (supported by the industry's demand outlook and favorable gross profit outlook), which we believe the companies are likely to channel into shareholder friendly actions (i.e., acquisitions, share repurchases, and in some cases a dividend) in excess of operational expenses; and 5) historical P/E valuation levels combined with our increased 2014 EPS estimates are driving our price targets higher.” Penske Automotive Group closed on Tuesday at $31.01.