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Is a Beat in Store for Penske (PAG) This Earnings Season?

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Penske Automotive Group (PAG - Free Report) is slated to release second-quarter 2021 results on Jul 28, after the closing bell.

For the quarter in discussion, Penske anticipates earnings per share to be more than $4, marking a whopping jump of more than 600% from the year-ago period. The projection is also higher than the Zacks Consensus Estimate of $2.7. Also, management estimates earnings before taxes to be more than $450 million and income from continuing operations to exceed $325 million, each skyrocketing more than 600% from the year-ago period. Further, the consensus mark for quarterly revenues is pinned at $6.49 billion.

The auto retailer delivered better-than-anticipated results in the last reported quarter on higher-than-expected revenues and gross profit from the retail automotive unit.

Over the preceding four quarters, the company topped estimates on all occasions, the average surprise being 31.3%. This is depicted in the graph below:

Trend in Estimate Revisions

The Zacks Consensus Estimate for Penske’s second-quarter earnings per share has been revised upward by 66 cents in the past 30 days. Moreover, it compares favorably with the year-ago quarter’s earnings of 56 cents per share, indicating year-on-year growth of a whopping 382.1%. Further, the Zacks Consensus Estimate for quarterly revenues suggests a year-over-year jump of 77.9%.

Earnings Whispers

Our proven model predicts an earnings beat for Penske this time around. The combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. This has been elaborated below.

Earnings ESP: Penske has an Earnings ESP of +53.06%. This is because the Most Accurate Estimate comes in $1.43 higher than the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Penske currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors to Note

Robust volume and product margins, reopening of the U.K. market — Penske’s second largest market — and the expanding Class 8 commercial truck market are all likely to have buoyed its second-quarter performance. In fact, the company’s quarterly results are likely to reflect gains from strong contributions across all segments of the business.

Markedly, for the quarter under review, the Zacks Consensus Estimate for the Retail Automotive segment, which accounts for bulk of Penske’s overall top line, is pegged at $5,414 million, indicating a rise from the 3,154 million recorded in the year-ago quarter. Also, the profit metric for the segment is pinned at $635 million, calling for a surge from the $466 million reported in prior-year quarter.

For the June-end quarter, the consensus mark for revenues in the Retail Commercial Truck segment stands at $527 million, suggesting growth of $399 million from the year-ago level. In addition, the gross profit metric for the segment is pinned at $75 million, higher than the year-earlier level of $60 million.

The consensus mark for revenues and gross profit in the Commercial Vehicles Australia/Power Systems and Other for the quarter under discussion is pegged at $115 million and $27.4 million, respectively, suggesting a jump from the $98 million and $26.4 million recorded in second-quarter 2020, respectively.
Apart from this, Penske's diversified business model is anticipated to have aided the company’s results during the quarter under review amid the ongoing global chip shortage grappling the auto sector.

Other Stocks With Favorable Combinations

Along with Penske, here are a few other stocks lined up to release second-quarter results soon. Encouragingly, our model predicts earnings beats for these stocks as well:

Allison Transmission (ALSN - Free Report) has an Earnings ESP of +0.08% and currently carries a Zacks Rank #3. The company is set to announce second-quarter 2021 results on Jul 29.

Sonic Automotive (SAH - Free Report) has an Earnings ESP of +18.53% and holds a Zacks Rank #2, at present. The company is scheduled to report quarterly figures on Jul 29.

Tenneco (TEN - Free Report) has an Earnings ESP of +1.2% and carries a Zacks Rank #3, currently. The company is slated to release second-quarter results on Aug 5.