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Penske Automotive Group (PAG) Down 4.7% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Penske Automotive Group, Inc. (PAG - Free Report) . Shares have lost about 4.7% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is PAG due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Penske Automotive Q4 Earnings Top Estimates, Up Y/Y

Penske Automotive recorded adjusted earnings of $1.01 per share in fourth-quarter fiscal 2017 compared with 91 cents a year ago. The bottom line also surpassed the Zacks Consensus Estimate of $1. Including tax benefits, the earnings came in at $3.85.

Net income from continuing operations skyrocketed 300% to $330 million in the reported quarter from $82.6 million a year ago. Excluding tax benefits, the adjusted income from continuing operations was $86.6 million in comparison to $77.4 billion in the prior-year quarter.

Revenues rose 10.4% year over year to $5.4 billion, beating the Zacks Consensus Estimate of $5.24 billion. In comparison to fourth-quarter fiscal 2016, same-store retail unit sales declined 2.7% to 106,522 units while retail unit sales went up 7% to 119,935. The rise in revenues is driven by solid U.S. retail automotive operations and a robust commercial truck business.

Gross profit increased 11.1% to $808.3 million from $727.3 million in fourth-quarter fiscal 2016. Operating income grew 9.4% to $137 million from $125.2 million in the year-earlier quarter.

Fiscal 2017 Results

Penske Automotive reported earnings of $7.14 per share in fiscal 2017, up from $3.99 earned in fiscal 2016. The Zacks Consensus Estimate for the metric was $4.31.

Income from continuing operations was $613 million from $347 million a year ago. Consolidated revenues increased to $21.4 billion from $20.1 billion in fiscal 2016. Moreover, the top line exceeded the Zacks Consensus Estimate of $21.23 billion.

Segmental Performance

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

Revenues from Retail Automotive rose to $4.9 billion from the year-ago figure of $4.6 billion.

Revenues from Retail Commercial Trucks increased to $308 million from $218 million in the year-ago period.

Revenues from Commercial Vehicles Australia/Power Systems and Other grew to $148 million from $118 million in the comparable quarter, last year.

Financial Position

Penske Automotive had cash and cash equivalents of $45.7 million as of Dec 31, 2017, up from $24 million as of Dec 31, 2016. Long-term debt was $2.1 billion as of Dec 31, 2017, up from $1.8 billion as of Dec 31, 2016.

Share Repurchase

During fiscal 2017, Penske Automotive repurchased 302,000 shares for $12.7 million at an average price of $41.95 per share. As of Dec 31, 2017, the company had outstanding share repurchase authorization of roughly $200 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been two revisions higher for the current quarter In the past month.

VGM Scores

At this time, PAG has a great Growth Score of A, though it is lagging a lot on the momentum front with a D. The stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise PAG has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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