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Penske Q2 Earnings & Revs Beat Estimates

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Penske Automotive Group Inc. (PAG - Free Report) posted a 26.8% increase in earnings per share to 71 cents in the second quarter of 2013 from 56 cents in the corresponding quarter last year. The results also exceeded the Zacks Consensus Estimate by 6 cents. Net profits increased 27.4% to $64 million in the quarter from $50.2 million a year ago.

Revenues improved 11.6% year over year to $3.7 billion, beating the Zacks Consensus Estimate of $3.6 billion. Same-store retail revenues rose 11.5% to $3.4 billion. The year-over-year 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. Sales went up 14.3% in the U.S. and 13.9% internationally.

New Vehicle revenues went up 12.7% to $1.9 billion on an 11.6% rise in sales to 51,307 units. Used Vehicle revenues rose 15.5% to $1.1 billion based on a 17.4% increase in sales to 42,332 units. Revenues in the Service and Parts segment rose 8.1% to $391.6 million.

Revenues in the Fleet and Wholesale Vehicle segment decreased 10.5% to $199.4 million, while revenues from Finance and Insurance segment rose 17.9% to $95.8 million.

Gross profits improved 12.7% to $569 million from $505 million in the second quarter of 2012. Operating profit augmented 24.9% to $113.7 million from $91.0 million a year ago.

Financial Position

Penske had cash and cash equivalents of $26.3 million as of Jun 30, 2013, a decrease from $43.4 million as of Dec 31, 2012. Long-term debt amounted to $920.2 million as of Jun 30, 2013, down from $937.5 million as of Dec 31, 2012. Long-term debt to capitalization ratio was 40.4% as of Jun 30, 2013 versus 41.6% as of Dec 31, 2012.


Penske announced that it will be acquiring the Western Star Trucks Australia business, which is a distributor of commercial vehicles, related spare parts and aftermarket across Australia and New Zealand and portions of Southeast Asia from Transpacific Industries Group Limited. The acquisition is expected to complete in the third quarter of 2013.

After the completion, it is expected to generate revenues of $420-$460 million and enhance earnings per share by 10 cents to 14 cents annually. However, the company has to incur charges of 2 cents per share for acquisition related costs in the third quarter of 2013.

Our Take

Penske Automotive Group sells new and previously-owned vehicles along with finance and insurance products. It operates 324 retail automotive franchises, offering 39 different brands and 30 collision repair centers. Apart from its franchises in the U.S. and Europe, the company offers repair and maintenance services. Currently, it retains a Zacks Rank #3 (Hold).

Some other stocks that are performing well in the industry where Penske operates include Asbury Automotive Group, Inc. (ABG - Free Report) , Lithia Motors Inc. (LAD - Free Report) and Group 1 Automotive Inc. (GPI - Free Report) . Asbury and Lithia are Zacks Rank #1 (Strong Buy) stocks while Group 1 carries a Zacks Rank #2 (Buy).

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