Penske Automotive (PAG) Beats Earnings Estimates in Q4

The share price of Penske Automotive Group, Inc. (PAG Free Report) fell almost 2.9% to $51.80 on Feb 8 after the company reported decline in revenue in fourth-quarter 2016. Penske Automotive’s earnings per share improved 12.3% to 91 cents from 81 cents recorded a year ago. Moreover, earnings per share surpassed the Zacks Consensus Estimate of 87 cents.

Net income rose 16% to $82.7 million in the reported quarter from $71.3 million a year ago. Income from continuing operations increased 6.5% to $77.4 million in the reported quarter from $72.7 million a year ago.

Revenues dipped 0.7% year over year to $4.88 billion, missing the Zacks Consensus Estimate of $4.98 billion. Excluding foreign exchange, total revenue increased 5.7%, driven by a 1.8% rise in total retail automotive sales to 112,129 units.

Same-store retail revenues declined 3.8%. Same-store retail automotive revenues dipped 4.4% to $4.34 billion.

Gross profit declined 1% to $727.3 million from $717.1 million in the fourth-quarter 2015. Operating income dipped 0.7% to $125.2 million from $126.1 million a year ago.

Penske Automotive Group, Inc. Price, Consensus and EPS Surprise
 

Penske Automotive Group, Inc. Price, Consensus and EPS Surprise | Penske Automotive Group, Inc. Quote

2016 Performance

Earnings for 2016 increased 7.1% to $3.93 per share from $3.67 in 2015. The figure also beat the Zacks Consensus Estimate of $3.91.

Revenues for 2016 rose 4.3% to $20.11 billion, marginally missing the Zacks Consensus Estimate of $20.17 billion.

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 inched down 0.4% to $4.55 billion in the reported quarter.

Revenues from Retail Commercial Trucks decreased 9.4% to $218.4 million from $241 million recorded in the year-ago quarter.

Revenues from Commercial Vehicles Australia/Power Systems and Other increased 5.8% to $118 million in the reported quarter.

Financial Position

Penske Automotive had cash and cash equivalents of $24 million as of Dec 31, 2016, down from $62.4 million as of Dec 31, 2015. Long-term debt was $1.87 billion as of Dec 31, 2016, up from $1.28 billion as of Dec 31, 2015.

Acquisition Update

In 2016, Penske Automotive acquired or opened new dealerships which will generate annual revenues of $700 million.

In Jan 2017, the company completed the CarSense acquisition that was announced in Dec 2016. The company expects this buyout to drive annual revenues of around $350 million along with earnings accretion of around 7 cents to 9 cents per share annually. 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.

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

Share Repurchase

In 2016, Penske Automotive acquired 4.5 million shares for $167.9 million.  As of Dec 31, 2016, the company has $32.1 million remaining under its share repurchase authorization.

Price Performance

In the last three months, Penske Automotive’s share price increased 11.5% while the Zacks categorized Retail/Wholesale Auto/Truck industry saw a 15.3% increase. The decline in revenues and cash balance in the last quarter adversely affected the share price.

Zacks Rank Key Picks

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

Better-ranked companies in the auto space include Honda Motor Co., Ltd. (HMC Free Report) , Fox Factory Holding Corp (FOXF Free Report) and General Motors Co. (GM Free Report) .

Honda sports a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth rate of around 27% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Meanwhile, Fox Factory and General Motors carry a Zacks Rank #2 (Buy). Fox Factory has an expected earnings growth rate of around 16.6% for the current year, while the same for General Motors is pegged at 9.4%.

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Penske Automotive Group, Inc. (PAG) – free report

Honda Motor Company, Ltd. (HMC) – free report

General Motors Company (GM) – free report

Fox Factory Holding Corp. (FOXF) – free report


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