Penske Automotive Group, Inc. (PAG): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report
Summary:
Penske Automotive's fourth-quarter 2014 earnings improved 14.5% to $0.79, marginally missing the Zacks Consensus Estimate of $0.80. Revenues grew 16.3% year over year to $4.41 billion, beating the Zacks Consensus Estimate of $4.37 billion. The year-over-year rise was driven by a 10.5% increase in total retail sales to 98,251 units, including a 6.8% rise in same-store retail sales to 94,357 units. Penske Automotive is poised to benefit from increasing dealerships, rising sales of new vehicles, a strong financial position and dividend hike. It is also introducing initiatives to drive new market penetration and improvements in used-vehicle remarketing. Thus, we are maintaining our Outperform recommendation.
Overview:
Penske Automotive Group, Inc., based in Bloomfield Hills, MI, was established in 1990 and is the second largest automotive retailer in the U.S. As of Sep 30, 2014, the company operated 177 franchises in the U.S. and 147 franchises outside the U.S., primarily in the U.K. Also, the company offers 35 different brands.
Apart from selling new and used vehicles, Penske Automotive offers higher-margin products, such as finance, insurance and vehicle service contracts maintenance repair services replacement parts and aftermarket automotive products. In the first nine months of 2014, New Vehicle represented 50.5% of the total revenue, Used Vehicle represented 29.3%, Service and Parts represented 10%, Fleet and Wholesale Vehicle represented 4.8%, Finance & Insurance represented 2.6%, and Commercial Vehicle and Car Rental represented 2.8%.
In the first nine months of 2014, Penske Automotive generated 61% of the total automotive dealership revenue in the U.S. and Puerto Rico, and 39% outside the U.S. Also, 71% of automotive dealership revenues have been generated from premium brands such as Audi, BMW, Mercedes-Benz and Porsche.
The company does not have any cost advantage from New Vehicle sales as it purchases directly from manufacturers and thus, competes primarily with other franchised dealers in marketing areas. For Used Vehicle sales, Penske Automotive competes with other franchised dealers, independent used-vehicle dealers, automobile rental agencies, online purchasing services, and private parties.
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