On Sep 11, 2013, we upgraded automotive retailer
Penske Automotive Group, Inc.
) to Outperform from Neutral based on the recent acquisition of
Western Star Trucks, which is expected to boost earnings.
Moreover, this Zacks Rank #1 (Strong Buy) stock is witnessing
rising sales of new vehicles and has a strong financial position
and cash flow.
Why the Upgrade?
Penske Automotive reported positive earnings surprise in the
last 4 quarters with an average beat of 5.91%. On Jul 31, 2013,
the company posted a 26.8% year over year increase in earnings
per share to 71 cents in the second quarter of 2013. The results
also exceeded the Zacks Consensus Estimate by 6 cents.
Revenues of Penske Automotive improved 11.6% year over year to
$3.7 billion, beating the Zacks Consensus Estimate of $3.6
billion. The rise in revenues was driven by a 14.1% increase in
retail sales to 93,639 units, including a 12.3% increase in
retail sales to 91,145 units on a same-store basis.
Since then, the Zacks Consensus Estimate for Penske
Automotive's 2013 earnings has increased 3.9% to $2.65 per share,
up 16.4% over 2012. Even the Zacks Consensus Estimate for the
company's 2014 earnings per share increased 5.2% over the last 60
days to $3.01.
Penske Automotive has been benefiting from the increase in
sales of new vehicles over the past few years. During the first
half of 2013, unit sales rose 10.6% to 97,270 units.
Moreover, Penske Automotive has a strong financial position,
good cash flow generation, and strong automotive retail
environment in the U.S. and U.K. markets. Further, the company
recently acquired Western Star Trucks Australia Pty Ltd., which
is among the top three names in heavy duty trucks in Australia.
It has affiliation with Daimler Trucks North America of
). The acquisition is expected to generate annualized pro forma
income of 10 cents to 14 cents per share for Penske
Other Stocks to Consider
Other stocks worth considering in the industry include
Asbury Automotive Group, Inc.
Lithia Motors Inc.
). Both these companies carry a Zacks Rank #1 (Strong Buy).
ASBURY AUTO GRP (ABG): Free Stock Analysis
DAIMLER AG (DDAIF): Get Free Report
LITHIA MOTORS (LAD): Free Stock Analysis
PENSKE AUTO GRP (PAG): Free Stock Analysis
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