Share price of Penske Automotive Group, Inc. (PAG Quick QuotePAG - Free Report) increased 6.7% to $39.62 on Jul 29 after the company reported better-than-expected second-quarter 2016 earnings. Penske Automotive’s earnings per share improved 6.7% to $1.11 from $1.04 recorded a year ago. Moreover, earnings per share surpassed the Zacks Consensus Estimate of $1.08.

Net income dropped 0.5% to $93.5 million in the reported quarter from $94 million a year ago. Income from continuing operations improved 0.6% to $94.7 million from $94.1 million in the year-ago quarter.
 
Revenues grew 6.8% year over year to $5.3 billion, surpassing the Zacks Consensus Estimate of $5.1 billion. Excluding foreign exchange, total revenue increased 9.2%, driven by a 6.2% rise in total retail automotive sales to 115,106 units.

Same-store retail revenues rose 0.2%. Same-store retail automotive revenues improved 0.7% to $4.59 billion.

Gross profit went up 5.5% to $771.3 million from $731.3 million in the second quarter of 2015. Operating income augmented 3.3% to $164.1 million from $158.9 million a year ago.

PENSKE AUTO GRP Price, Consensus and EPS Surprise

PENSKE AUTO GRP Price, Consensus and EPS Surprise | PENSKE AUTO GRP Quote

Segment Performance

The company operates under three reportable segments – Retail Automotive, Retail Commercial Trucks, and Commercial Vehicles Australia/Power Systems and Other.

Revenues from Retail Automotive rose 6.2% to $4.8 billion in the reported quarter.

Revenues from Retail Commercial Trucks increased 27.9% to $309.5 million from $241.9 million recorded in the year-ago quarter.

Revenues from Commercial Vehicles Australia/Power Systems and Other decreased 12.9% to $107.8 million in the reported quarter.

Financial Position

Penske Automotive had cash and cash equivalents of $97.5 million as of Jun 30, 2016, up from $62.4 million as of Dec 31, 2015. Long-term debt was $1.66 billion as of Jun 30, 2016, up from $1.28 billion as of Dec 31, 2015.

Acquisition Update

On Jul 27, 2016, Penske Automotive acquired an additional 14.4% interest in Penske Truck Leasing Co., L.P. (“PTL”), from subsidiaries of GE Capital Global Holdings, LLC, for $498.7 million. The acquisition was supported by the company's existing liquidity including the U.S. credit agreement. After the acquisition, Penske Automotive holds a 23.4% ownership interest in PTL. The company expects that this acquisition will help boost earnings per share by 25 cents annually and will lead to additional cash flow. The acquisition will also lead to significant cash tax savings.

In Apr 2016, Penske Automotive’s subsidiary, Premier Truck Group acquired Harper Truck Centres, a Freightliner, Western Star, Thomas Built Bus and Fuso commercial truck dealership that operates in Ontario, Canada. The company expects that this acquisition will add annual revenues of $130 million and complement its partnership with Freightliner and Western Star brands. This acquisition should provide huge market potential to Penske Automotive and lead to business opportunities in the future.

Zacks Rank

Currently, Penske Automotive carries a Zacks Rank #3 (Hold).

Some better-ranked automobile stocks include The Goodyear Tire & Rubber Company (GT Quick QuoteGT - Free Report) , Johnson Controls Inc. (JCI Quick QuoteJCI - Free Report) and Gentex Corp. (GNTX Quick QuoteGNTX - Free Report) , each carrying a Zacks Rank #2 (Buy).

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