Penske Automotive Delivers Growth, Rising Income

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Low interest rates and rising gas prices are pushing consumers to trade in their old vehicles for newer ones. This trend bodes well forPenske Automotive Group ( PAG ) -- the nation's second-largest auto dealer.

Penske has posted double-digit earnings growth in each of the past 10 quarters. Sales climbed by double digits for the past four periods.

Earnings and sales fell in 2008 and 2009, but Penske has delivered growth since. Last month, Penske reported full-year 2012 profit that jumped 27% to $2.28 a share. Sales grew 18% to more than $13 billion. That was the biggest top-line gain in 10 years.


Analysts see earnings rising 12% to $2.56 a share this year. The estimate was recently revised higher.

Penske has a three-year Earnings Stability Factor of 4, indicating rock steady growth.

Besides stable growth, Penske has been revving up its shareholder dividend since 2011. It halted its dividend program in 2009 to save cash during hard economic times.

Penske has since raised its dividend seven times. In late January, the company hiked its cash distribution by nearly 8% to 14 cents a share. Its dividend doubled in less than two years.

On an annual basis Penske pays 56 cents a share, giving it a yield of about 1.7%. It has the second highest yield in the Retail/Wholesales-Automobile group. RivalKar Auction Services ( KAR ) offers the highest yield at 3.8%.

Penske is trading in a cup base with a 34.44 buy point. The stock is riding a three-week win streak. Technically, the cup formation is the second part of a base-on-base pattern.

On the downside, Penske's latest base is a third-stage structure. Generally it's best to focus on first- or second-stage patterns.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Personal Finance , Investing Ideas

Referenced Stocks: KAR , PAG

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