Penske Automotive Tops Q2 Earnings & Revenues on Solid Sales - Analyst Blog

By Zacks Equity Research,

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Penske Automotive Group Inc. 's ( PAG ) second-quarter 2014 earnings improved 27.1% to 89 cents from 70 cents reported in the year-ago quarter. The results also surpassed the Zacks Consensus Estimate by 2 cents.

Penske Automotive Group, Inc - Earnings Surprise | FindTheBest

Net income from continuing operations rose 27.5% to $80.3 million in the quarter from $63 million a year ago. 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. Same-store retail revenues rose 12.7% to $3.9 billion. The year-over-year rise was driven by a 10.4% increase in total retail sales to 101,422 units, including a 5.3% increase in same-store retail sales to 96,658 units. Retail sales went up 8.4% in the U.S. and 15.3% internationally.

New Vehicle revenues escalated 18.2% to $2.24 billion on a 10.5% rise in sales to 55,510 units. Used Vehicle revenues rose 19.9% to $1.3 billion owing to a 10.4% increase in sales to 45,912 units. Meanwhile, revenues in the Service and Parts segment improved 13.2% to $435.7 million.

Revenues in the Fleet and Wholesale Vehicle segment increased 20.2% to $216.8 million, while revenues from the Finance and Insurance segment rose 18.6% to $112.3 million. Revenues from the Commercial Vehicle, Car Rental and other segment amounted to $130.5 million in the second quarter of 2014.

Gross profit improved 19.2% to $666.9 million from $559.5 million in the second quarter of 2013. Operating income augmented 21.5% to $136.2 million from $112.1 million a year ago.

Share Repurchase & Dividend

During the first half of 2014, Penske repurchased 335,350 shares for $15.5 million, on an average price of $46.20 per share. The remaining authorization available under the current repurchase program was $77.6 million as of Jun 30, 2014.

Earlier this month, the company approved a 5.3% rise in cash dividend to 20 cents per share for the second quarter of 2014. The dividend will be paid on Sep 2, 2014, to shareholders of record as of Aug 11. The share repurchases and increase in dividend reflects the company's commitment to enhance shareholders return.

Financial Position

Penske had cash and cash equivalents of $61.4 million as of Jun 30, 2014, an increase from $49.8 million as of Dec 31, 2013. Long-term debt stood at $1.08 billion as of Jun 30, 2014, in line with the figure reported on Dec 31, 2013.

Our Take

Penske is poised to benefit from increasing dealerships, rising sales of new and used vehicles and a strong financial position. However, we are concerned about intensifying competition, high inventory levels and exposure to foreign exchange rate volatility. Currently, the stock carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the auto sector include Rush Enterprises, Inc. ( RUSHA ), Lithia Motors Inc. ( LAD ) and Asbury Automotive Group, Inc. ( ABG ). Rush Enterprises and Lithia Motors sport a Zacks Rank #1 (Strong Buy) while Asbury Automotive is a Zacks Rank #2 (Buy) stock.

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PENSKE AUTO GRP (PAG): Free Stock Analysis Report

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Zacks Investment Research

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

This article appears in: Investing , Business , Earnings , Stocks
Referenced Stocks: PAG , LAD , ABG , RUSHA

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