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Penske Automotive Signs Agreement to Buy CarShop in UK

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Penske Automotive Group, Inc. (PAG - Free Report) has signed a deal to acquire the leading retailer of used vehicles in U.K. – CarShop. The company expects CarShop to generate annual revenues of around $340 million along with earnings accretion of around 7 cents to 9 cents per share annually. The acquisition is expected to close in the first quarter of 2017, subject to certain conditions.

Starting 1999, CarShop has been operating through five large-scale retail locations in Cardiff, Swindon, Northampton, Norwich and Doncaster. CarShop also has a 15-acre vehicle preparation center in Leighton Buzzard. This center has the capability to recondition 45,000 vehicles annually. In order to provide a transparent customer buying experience CarShop retails high-quality used vehicles at fixed retail prices. Penske Automotive expects this acquisition to complement the existing core auto retail business of the company.

Last month, Penske Automotive signed a deal to acquire CarSense. The company expects this buyout to drive annual revenues by around $350 million along with earnings accretion of around 7 cents to 9 cents per share annually. The acquisition is expected to close in the first quarter of 2017, subject to customary conditions. Penske Automotive expects this buyout to diversify its business and expand its customer base. It will also help the company capitalize on the highly fragmented used automotive retail segment.

CarSense is a stand-alone specialty retailer of used vehicles in the U.S. Starting 1997, CarSense has been operating in five locations. It mainly reconditions and retails high-quality used vehicles.  

Used vehicle annual sales in the U.K. are almost three times that of new vehicles. Penske Automotive expects the acquisitions of CarShop in the U.K. and CarSense in the U.S. to strengthen the company’s position in two of the largest markets, thus leading to enhanced growth opportunities.

Penske Automotive Group, Inc. Price

Price Performance

In the last one year, Penske Automotive’s share price increased 45.8% while the Zacks categorized Retail/Wholesale Auto/Truck industry saw a 23.4% increase. The company benefitted from increasing dealerships, rising new vehicle sales and capital deployment. Record earnings in the last quarter also boosted the company’s share price.

Zacks Rank & Key Picks

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

Better-ranked companies in the auto space include The Goodyear Tire & Rubber Company (GT - Free Report) , Fox Factory Holding Corp (FOXF - Free Report) and GKN plc .

Fox Factory sports a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth rate of around 16.6% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meanwhile, Goodyear Tire and GKN carry a Zacks Rank #2 (Buy). Goodyear Tire has a long-term growth rate of 17.2% while the same for GKN is pegged at 6.3%.

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