Penske Automotive's second-quarter 2014 earnings improved 27.1% to
$0.89, surpassing the Zacks Consensus Estimate by $0.02. The
improvement was driven by favorable brand mix and geographical
diversification of the revenue base. Revenues grew 21.4% year over
year to $4.41 billion, surpassing the Zacks Consensus Estimate of
$4.25 billion. The year-over-year rise was driven by a 10.4%
increase in total retail sales, including a 5.3% increase in
same-store retail sales. Penske Automotive is poised to benefit
from increasing dealerships, rising sales of new vehicles and a
strong financial position. The company also raised its quarterly
dividend by 5.3%. Thus, we are maintaining our Outperform
Penske Automotive Group Inc., based in Bloomfield Hills, MI, was
established in 1990 and is the second largest automotive retailer
in the U.S. As of Jun 30, 2014, the company operated 177 franchises
in the U.S. and 147 franchises outside the U.S., primarily in the
U.K. Also, the company offers 35 different brands.
Apart from selling new and used vehicles, Penske Automotive
offers higher margin products, such as finance, insurance and
vehicle service contracts maintenance repair services replacement
parts and aftermarket automotive products. In the first half of
2014, New Vehicle represented 50.4% of the total revenue, Used
Vehicle represented 29.3%, Service and Parts represented 10.1%,
Fleet and Wholesale Vehicle represented 4.8%, Finance &
Insurance represented 2.6%, and Commercial Vehicle and Car Rental
In the first half of 2014, Penske Automotive generated 61% of
the total automotive dealership revenue in the U.S. and Puerto Rico
and 39% outside the U.S. Also, 71% of automotive dealership
revenues have been generated from premium brands such as Audi, BMW,
Mercedes-Benz and Porsche.
The company does not have any cost advantage from New Vehicle
sales as it purchases directly from manufacturers and thus competes
primarily with other franchised dealers in marketing areas. For
Used Vehicle sales, Penske Automotive competes with other
franchised dealers, independent used-vehicle dealers, automobile
rental agencies, online purchasing services, private parties and
Penske Automotive Group, Inc. (PAG): Read the Full
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