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Penske's (PAG) Q3 Earnings & Sales Beat Estimates, Up Y/Y

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Zacks Equity Research
·4 min read
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Penske Automotive Group, Inc. PAG reported third-quarter 2020 adjusted earnings of $2.87 per share, surpassing the Zacks Consensus Estimate of $1.59.

Markedly, higher-than-expected revenues from the Retail Automotive segment resulted in this outperformance. Revenues from the segment came in at $5,258 million, beating the Zacks Consensus Estimate of $4,969 million. Moreover, the bottom line came in significantly higher than the year-ago quarter’s profit of $1.42 per share, up a whopping 102% year on year.

The auto retailer registered net sales of $5,971.6 million, outpacing the Zacks Consensus Estimate of $5,543 million. The top-line figure also comes in marginally higher than the year-ago quarter’s $5,967.6 million.

The company’s gross profit for the reported quarter increased to $956.5 million from the prior-year quarter’s $869.7 million. During the third quarter, operating income jumped 67.8% from the prior-year period to $284.2 million.

For the September-end quarter, same-store retail unit sales slid 4.5% year over year to 122,268. Within the Retail Automotive segment, same-store new vehicle revenues rose 2.7% year on year to $2,349.8 million, while same-store used-vehicle revenues improved 8.4% to $1,938.2 million.

Penske operates 16 Used Vehicle SuperCenters. The company anticipates to open two additional Used Vehicle SuperCenters over the next 90 days and has four additional sites under development which would expand its current footprint of SuperCenters by 40%.

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

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

Penske Automotive Group, Inc. price-consensus-eps-surprise-chart | Penske Automotive Group, Inc. Quote

Segmental Performance

During the July-September period, revenues in the Retail Automotive segment climbed to $5,258 million from the year-ago quarter’s $5,155.4 million. Further, gross profit of $849.7 million compared favorably with the $747.5 million reported in third-quarter 2019.

In the September-end quarter, revenues in the Retail Commercial Truck segment decreased to $590.9 million from the year-ago level of $692.3 million. Gross profit for the segment was $73.1 million, down from the year-earlier quarter’s $86.6 million.

Revenues in the Commercial Vehicles Australia/Power Systems and Other for the reported quarter increased to $122.7 million from the $119.9 million generated in the prior-year quarter. Gross profit came in at $33.7 million compared with the $35.6 million witnessed in third-quarter 2019.

Costs & Financial Position

During the third quarter, there was a 10.1% drop in selling, general and administration expenses as a percentage of gross profit from the year-ago quarter’s level.

Penske had cash and cash equivalents of $92.7 million as of Sep 30, 2020, up from $28.1 million as of Dec 31, 2019. As of Sep 30, 2020, long-term debt amounted to $2,216.1 million, down from $2,257 million as of Dec 31, 2019.

Dividends & Share Repurchase

On Oct 14, Penske announced the reinstatement of a cash dividend in the amount of 42 cents per share payable on Dec 1 to shareholders of record as of Nov 10, 2020. The company repurchased 1,027,736 shares for the nine-month period ended Sep 30, 2020 for $34.4 million. As of Sep 30, 2020, Penske had a share-repurchase authorization of $170.6 million.

Zacks Rank & Other Stocks to Consider

Penske currently flaunts a Zacks Rank #1 (Strong Buy). Shares of the company have appreciated 2.7%, year to date, underperforming the industry’s rise of 19.3%.

Some other top-ranked stocks in the auto sector are Lear Corporation LEA, Autoliv Inc ALV and LCI Industries LCII, all of which sport a Zacks Rank of 1, at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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