Penske Q1 Earnings Beat Estimates by a Penny - Analyst Blog

Penske Automotive Group Inc.'s PAG first-quarter 2014 earnings improved 15.9% to 73 cents from 63 cents reported in the year-ago quarter. The results also surpassed the Zacks Consensus Estimate by a penny.

Net profit from continuing operations rose 15.4% to $66.1 million in the quarter from $57.3 million a year ago. The improvement was driven by the favorable impacts from brand mix and the geographical diversification of revenue base.

Revenues grew 20.9% year over year to $4.05 billion, surpassing the Zacks Consensus Estimate of $3.7 billion. Same-store retail revenues rose 14.9% to $3.6 billion. The year-over-year rise was driven by a 13.1% increase in total retail sales to 95,658 units, including a 9.9% increase in same-store retail sales to 92,075 units. Retail sales went up 9.4% in the U.S. and 21% internationally.

New Vehicle revenues escalated 18% to $2.03 billion on an 11.6% rise in sales to 50,288 units. Used Vehicle revenues rose 21.6% to $1.2 billion owing to a 14.8% increase in sales to 45,370 units. Revenues in the Service and Parts segment improved 10% to $417.5 million.

Revenues in the Fleet and Wholesale Vehicle segment increased 9.3% to $187.9 million, while revenues from the Finance and Insurance segment rose 22.1% to $104.9 million. Revenues from the Commercial Vehicle, Car Rental and other segment amounted to $109.8 million in the first quarter of 2014.

Gross profit improved 18.5% to $624 million from $526.6 million in the first quarter of 2013. Operating income augmented 13.8% to $119.7 million from $105.2 million a year ago.

Financial Position

Penske had cash and cash equivalents of $54.9 million as of Mar 31, 2014, an increase from $49.8 million as of Dec 31, 2013. Long-term debt stood at $1.08 billion as of Mar 31, 2014, in line with the figure reported as on Dec 31, 2013.

Our Take

Penske sells new and previously-owned vehicles along with finance and insurance products. Apart from its franchises in the U.S. and Europe, the company offers repair and maintenance services. We are concerned about increasing competition, high inventory level and exposure to foreign exchange rates. Currently, it retains a Zacks Rank #3 (Hold).

AutoNation Inc. AN, one of the largest automotive retailers in the U.S., posted a 10.3% rise in earnings per share to 75 cents in the first quarter of 2014 from 68 cents in the same quarter of 2013. However, earnings per share were in line with the Zacks Consensus Estimate. Revenues increased 6.5% to $4.36 billion, marginally missing the Zacks Consensus Estimate of $4.39 billion. The revenue growth was attributable to strong performance across all business sectors.

Other Stocks to Consider

Lithia Motors Inc. LAD and Asbury Automotive Group, Inc. ABG, both carrying a Zacks Rank #2 (Buy), are better-ranked automobile stocks worth considering.