Penske Automotive's Sales and Dealership Network Expand
On Oct 10, 2014, we issued an updated research report on Penske Automotive Group Inc. (PAG). This Zacks Rank #2 (Buy) stock reported a +2.30% earnings surprise in the last quarter.
Penske Automotive’s second-quarter 2014 earnings improved 27.1% to 89 cents from 70 cents in the year-ago quarter. The results also surpassed the Zacks Consensus Estimate by 2 cents. Net income from continuing operations rose 27.5% to $80.3 million in the quarter from $63 million a year ago. The improvement was driven by favorable brand mix and geographical diversification of the revenue base.
Penske Automotive aims to boost earnings by expanding its dealership network. In Oct 2014, the company completed the acquisition of MTU Detroit Diesel Australia from Daimler AG (DDAIF) and MTU Friedrichshafen. The acquisition is expected to boost the company’s annual revenues by $225–$250 million. In the second quarter, Penske Automotive opened a new Toyota Motor Corporation (TM) dealership in Surprise, AZ. The company also forayed into Spain with the establishment of a 50-50 joint venture that will exclusively operate BMW and MINI dealerships in Barcelona.
Penske Automotive has been benefiting from increasing new vehicle sales over the past few years. Notably, new vehicle unit sales in the first half of 2014 escalated 11% to 105,798 units. The company also expects the U.S. and U.K. automotive markets to perform well in the future. This will enhance the company’s business prospects further.
The company also boasts a strong financial position and favorable automotive retail environment in the U.S. and U.K. markets. Banking on this strength, Penske Automotive repurchased 335,350 shares for $15.5 million, at an average price of $46.20 a share in the first half of 2014. The company also approved a 5.3% rise in cash dividend to 20 cents a share for the second quarter of 2014. The share repurchases and increased dividends reflect the company’s commitment to enhance shareholders’ return.
Investors interested in automobile stocks can also consider Asbury Automotive Group, Inc. (ABG), which carries the same Zacks Rank as Penske Automotive.
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Read the Full Research Report on ABG
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