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Penske (PAG) Up 7.7% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Penske Automotive (PAG). Shares have added about 7.7% 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 drivers.

Penske Puts Up a Stellar Q1 Show

Penske reported impressive first-quarter 2022 adjusted earnings of $4.76 per share, increasing a whopping 110.6% year over year and surpassing the Zacks Consensus Estimate of $3.94. Higher-than-expected gross profit in the Retail Automotive and Retail Commercial Truck segments resulted in this outperformance.

The auto retailer registered net sales of $6,975.4 million, outpacing the Zacks Consensus Estimate of $6,257.2 million. The top line also rose 20.8% from the year-ago quarter.

Penske Automotive’s gross profit in the reported quarter increased 34.9% on a year-over-year basis to $1,231.7 million. The operating income also jumped 83.1% to $402 million.

For the March quarter, same-store retail unit sales declined 1.3% year over year to 109,218. Within the Retail Automotive segment, same-store new-vehicle revenues edged down 3% to $2,342.5 million, while same-store used-vehicle revenues rose 29.3% to $2,332.6 million.

Segmental Performance

In the reported period, revenues in the Retail Automotive segment came in at $6,029.2 million, increasing 16% from a year ago and topping the consensus mark of $5,507 million. Gross profit of $1,050.7 million increased 31.4% year over year and crossed the consensus mark of $992 million.

Revenues in the Retail Commercial Truck segment jumped 82.3% to $792.3 million and exceeded the consensus mark of $554 million. Gross profit in the segment was $141.2 million, a steep rise of 77% from the year-earlier quarter’s figure and beating the consensus mark of $107 million.

The Commercial Vehicles Australia/Power Systems segment’s revenues in the reported quarter totaled $153.9 million, up 16.4% from the year-ago quarter’s levels and crossing the consensus mark of $149 million. Gross profit came in at $39.8 million, rising 16.3% from the 2021 level but missing the Zacks Consensus Estimate of $43.07 million.

Financial Tidbits

In the quarter under review, SG&A costs totaled $797.8 million, up 20.1% year over year. Penske had cash and cash equivalents of $170.3 million as of Mar 31, 2022, up from $100.7 million in 2021 end. The long-term debt amounted to $1,383.9 million, slightly down from $1,392 million as of Dec 31, 2021.

In the reported quarter, PAG repurchased 1.2 million shares of common stock for nearly $119.2 million.   As of Apr 26, 2022, around $46.3 million remains available for repurchase under its existing share repurchase authorization.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

The consensus estimate has shifted 13.06% due to these changes.

VGM Scores

Currently, Penske has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% 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.

Performance of an Industry Player

Penske is part of the Zacks Automotive - Retail and Whole Sales industry. Over the past month, AutoNation (AN), a stock from the same industry, has gained 1.8%. The company reported its results for the quarter ended March 2022 more than a month ago.

AutoNation reported revenues of $6.75 billion in the last reported quarter, representing a year-over-year change of +14.4%. EPS of $5.78 for the same period compares with $2.79 a year ago.

AutoNation is expected to post earnings of $5.95 per share for the current quarter, representing a year-over-year change of +23.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +3.8%.

AutoNation has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of A.


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