Penske Beats Expectations - Analyst Blog


Penske Automotive Group Inc. ( PAG ) recorded a 41% increase in profits to 55 cents per share in the first quarter of 2012 from 39 cents in the previous year. The profit surpassed the Zacks Consensus Estimate by 7 cents per share.

In absolute terms, profits increased 37.6% to $50.2 million from $36.5 million in the first quarter of 2011.

The higher profits were attributable to strong performance in both the U.S. and international markets. Higher new and used vehicle sales and improvement in service and part operations boosted gross margin.

Total revenue rose 17.9%, to $3.2 billion, mainly driven by an 18.1% increase in retail unit sales to 81,472 vehicles and improvement in the company's used-to-new vehicle ratio to 0.89 from 0.78.

Same store retail units increased 9.5% to 74,993 vehicles and same store retail revenues scaled up 7.5% to $2.8 billion during the quarter.

New Vehicle revenues advanced 13.9% to $1.6 billion on an 11.5% rise in sales to 43,099 units. Used Vehicle revenues rose 22.5% to $969.7 million based on a 26.6% increase in sales to 38,373 units. Revenues in the Service and Parts segment increased 8.3% to $369.7 million, Finance and Insurance segment grew 20.2% to $79.9 million and Fleet and Wholesale vehicle advanced 47.6% to $244.6 million in the quarter.

Gross profit increased 15.3% to $506.6 million from $439.2 million in the year ago quarter. As a percentage of gross profit, selling, general and administrative expenses declined to 78.7% from 80.9% in first quarter of 2011. The company reported operating income of $94.6 million, which was 2.9% of revenues, depicting improvement of 30 basis points.

Penske had cash and cash equivalents of $31.8 million as of March 31, 2012, an improvement from $28.5 million in the corresponding period of the prior year. Long-term debt amounted to $848.6 million as of March 31, 2012, compared with $846.8 million as of December 31, 2011.

In the quarter, the company repurchased 350,000 shares of its common stock for $8.5 billion, reflecting an average price of $24.35. Currently, the company has remaining authorized shares worth up to $98.3 million for repurchase out of its outstanding common stock, debt or convertible debt.

Penske Automotive Group operates with 335 retail automotive franchises, providing 40 different brands and 29 collision repair centers. The company sells new and previously owned vehicles along with finance and insurance product. Apart from its franchises in US and Europe, the company offers repair and maintenance services of the brands it sells.

The company's product mix, including a wide range of imported and luxury brands, helps it maintain a strong foothold in both US and international markets. It competes with Lithia Motors ( LAD ) and Sonic Automotive ( SAH ). Currently, the company has a Zacks #2 Rank, which translates into a rating of "Buy" for the short term (1 to 3 months).

LITHIA MOTORS ( LAD ): Free Stock Analysis Report
PENSKE AUTO GRP ( PAG ): Free Stock Analysis Report

SONIC AUTOMOTVE ( SAH ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: LAD , PAG , SAH

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