Penske (PAG) Up 1% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Penske Automotive (PAG). Shares have added about 1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Penske due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Penske Q2 Earnings Mark 13th Straight Quarter of Beat
Penske reported reported second-quarter 2023 adjusted earnings of $4.41 per share, which decreased 11% year over year but surpassed the Zacks Consensus Estimate of $4.08. This marked the 13th consecutive earnings beat for the company.
The auto retailer registered net sales of $7,468.5 million, which topped the Zacks Consensus Estimate of $7,056 million. The top line rose 8% from the year-ago quarter. Strong performance in automotive and commercial truck operations contributed to the outperformance.
Penske’s gross profit in the reported quarter increased 2.9% on a year-over-year basis to $1,273 million. The operating income went down 1.8% to $380 million. Foreign currency exchange adversely affected revenues by $23.7 million, net income attributable to common stockholders by $0.5 million and earnings per share by $0.01.
In the reported quarter, same-store retail units rose 5.6% year over year to 120,203. Within the Retail Automotive segment, same-store new-vehicle revenues were up 15.1% to $2,782.4 million. Same-store used-vehicle revenues fell 3.5% to $2,269.8 million.
Segmental Performance
In the reported period, revenues in the Retail Automotive segment came in at $6,406 million, up 6.8% from a year ago and topping our estimate of $5,621.7 million. The outperformance resulted from higher-than-expected revenues from new and used vehicles as well as parts/services. Gross profit of $1,085.9 inched up 2.4% year over year and came ahead of our estimate of $956.5 million.
Revenues in the Retail Commercial Truck segment increased 19.6% to $919.2 million but fell short of our estimate of $930 million. Sales underperformance could be attributable to lower used Retail Commercial Truck sales of 704 units compared with our estimate of 772 units. Gross profit in the segment was $146.8 million, rising from $136 million in the year-earlier quarter figure and topping our expectation of $129.7 million.
The Commercial Vehicle Distribution and Other segment’s revenues in the reported quarter increased 1.7% to $143.3 million and lagged our estimate of $153.6 million. Gross profit came in at $40.3 million, down from $41 million in the year-ago period but higher than our estimate of $37 million.
Financial Tidbits
In the quarter under review, SG&A costs totaled $858.1 million, up 4.9% year over year. As of Jun 30, 2023, Penske had cash and cash equivalents of $119.6 million, up from $106.5 million on Dec 31, 2022. The long-term debt amounted to $1,743.7 million, up from $1,622.1 million as of Dec 31, 2022.
During the quarter under discussion, PAG repurchased 2.6 million shares of common stock for $350.4 million. As of Jun 30, 2023, $246.3 million of stock repurchase authorization remained outstanding.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month.
The consensus estimate has shifted 7.88% due to these changes.
VGM Scores
At this time, Penske has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Penske has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report
