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Penske Automotive (PAG) Misses Earnings Estimates in Q4

Zacks Equity Research

Shares of Penske Automotive Group, Inc. PAG have plunged roughly 8% in a day’s trading, following the fourth-quarter 2018 earnings release. In the reported quarter, the company recorded adjusted earnings of $1.11 per share, which missed the Zacks Consensus Estimate of $1.16. It recorded adjusted earnings of $1.01 per share in the year-ago quarter.

Adjusted income from continuing operations increased 9.6% year over year to $94.9 million in the reported quarter from $86.6 million a year ago.

Total revenues rose 0.8% year over year to $5.44 billion, which missed the Zacks Consensus Estimate of $5.46 billion. The decline is due to a shortage in the availability of products and delay in Worldwide Harmonized Light Vehicle Testing ("WLTP") certification for the company’s businesses in western Europe.

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

 

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

Same-store retail unit sales decreased 2.3% year over year to 113,547 units. Within the retail automotive segment, new-vehicle revenues declined 5.9% year over year to $2.3 billion while used-vehicle revenues gained 8.3% to $1.7 billion.

The company’s gross profit increased to $852.6 million from $808.1 million in the prior-year quarter. During the quarter under review, operating income grew 0.3% to $136.6 million.

2018 Results

In 2018, Penske Automotive’s adjusted income from continuing operations increased 22.9% to $454.9 million while adjusted earnings per share increased 23.9% to $5.34.

Net sales for the year went up 6.5% year over year to $22.8 billion.

Segmental Performance

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

Revenues from Retail Automotive was $4.95 billion, almost similar to the year-ago quarter.

Revenues from Retail Commercial Trucks increased to $358 million from $308 million in the year-ago quarter.

In the reported quarter, revenues from Commercial Vehicles Australia/Power Systems and Other declined to $132 million from $148 million a year ago.

Financial Position

Penske Automotive had cash and cash equivalents of $39.4 million as of Dec 31, 2018, marking a decline from $45.7 million recorded as of Dec 31, 2017. Long-term debt was $2.1 billion at the end of 2018, which was almost in line with the year-ago figure.

Share Repurchase

In 2018, Penske Automotive repurchased 1,587,494 shares for $68.9 million. At the end of the year, it had roughly $136.9 million available under the existing share repurchase authorization.

Further, the company paid $190.1 million to shareholders through dividends and share repurchases in 2019. The figure represents roughly 40% of the company’s net income.

Zacks Rank & Other Stocks to Consider

Penske Automotive currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the broader auto sector are General Motors Company GM, Cooper Tire & Rubber Company CTB, and Genuine Parts Company GPC, each currently carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

General Motors has an expected long-term growth rate of 8.5%. Share price of the company has increased 3.1% in the past six months.

Cooper Tire has an expected long-term growth rate of 4%. Over the past six months, shares of the company have gained 11.1%.

Genuine Parts has an expected long-term growth rate of 5%. Shares of the company have gained 3.6% in the past six months.

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