On Feb 25, we maintained our Neutral recommendation on
Penske Automotive Group Inc.
), despite the challenging market condition for new and used cars
and rising competition from the retail and service centers owned
by original equipment manufacturers, due to its wide range of
imported and luxury brands, which helps it to maintain a strong
foothold in the U.S. and overseas markets.
Penske posted a 21.3% increase in profits to 57 cents per share
in the fourth quarter of 2012 from 47 cents in the same quarter
of 2011. Profit per share exceeded the Zacks Consensus Estimate
by 4 cents. Net profits increased 19.5% to $51.0 million in the
quarter from $42.7 million a year ago.
Revenues escalated 17.9% to $3.4 billion, including an 11.4% rise
in same-store retail revenues in the quarter. Revenues were
marginally higher than the Zacks Consensus Estimate of $3.3
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for fiscal 2013 increased 2.8% to $2.54 per
share. The Zacks Consensus Estimate for fiscal 2014 also went up
3.6% to $2.86 per share.
Penske benefits from its diversified revenue stream. A
significant portion of the company's profit is derived from
higher-margin service and parts sales, which are less cyclical
than retail vehicle sales and thus provides stability to the
In addition, the company benefit from its expansion strategy. It
has expanded its global presence by closing accretive
acquisitions in Northern Ireland and Italy. It has also expanded
its footprint domestically by entering the Madison, WI market.
However, the company faces tough competition from the retail as
well as service centers owned by OEMs. In addition, the retail
vehicle market in the U.S. remains challenging for both new and
used car sales volume.
Other Stocks to Look For
Few stocks that are performing well in the industry where Penske
Asbury Automotive Group, Inc.
Lithia Motors Inc.
America's Car-Mart Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
ASBURY AUTO GRP (ABG): Free Stock Analysis
AMERICAS CAR-MT (CRMT): Free Stock Analysis
LITHIA MOTORS (LAD): Free Stock Analysis
PENSKE AUTO GRP (PAG): Free Stock Analysis
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