Why Is Penske (PAG) Up 4.6% Since Last Earnings Report?
It has been about a month since the last earnings report for Penske Automotive (PAG). Shares have added about 4.6% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Penske's Q3 Earnings Snap Beat Streak, Decline Y/Y
Penske's 13 consecutive quarter-long beat streak snapped as it reported lower-than-expected earnings for the third quarter of 2023. The auto retailer reported adjusted earnings of $3.90 per share, which decreased 15.4% year over year and also missed the Zacks Consensus Estimate of $4.04. The company registered net sales of $7,447.8 million, marginally missing the Zacks Consensus Estimate of $7,449 million. The top line rose 7.6% from the year-ago quarter.
Penske’s gross profit in the reported quarter increased 2.8% on a year-over-year basis to $1,220 million. The operating income contracted 8.6% to $331.5 million. Foreign currency transactions positively impacted revenues by $172.4 million, net income by $1.3 million and earnings per share by 2 cents.
In the reported quarter, same-store retail units rose 10.3% year over year to 119,921. Within the Retail Automotive segment, same-store new-vehicle revenues were up 14.9% to $2,726.5 million. Same-store used-vehicle revenues increased 3.7% to $2,263.4 million.
Segmental Performance
In the reported period, revenues in the Retail Automotive segment came in at $6,325.4 million, up 10% from a year ago and topping our estimate of $5,458 million. The outperformance resulted from higher-than-expected revenues from new and used vehicles. Gross profit of $1,025.3 inched up 1.8% year over year and came ahead of our estimate of $935 million.
Revenues in the Retail Commercial Truck segment decreased 5% to $964.7 million and fell short of our estimate of $981 million. Gross profit in the segment was $155.4 million, rising from $139.7 million in the year-earlier quarter figure and topping our expectation of $128.4 million.
The Commercial Vehicle Distribution and Other segment’s revenues in the reported quarter increased 9.9% to $157.7 million and topped our estimate of $152.7 million. Gross profit came in at $39.7 million, down from $40.3 million in the year-ago period but higher than our estimate of $35.8 million.
Financial Tidbits
In the quarter under review, SG&A costs totaled $853.5 million, up 7.7% year over year. As of Sep 30, 2023, Penske had cash and cash equivalents of $104.4 million, down from $106.5 million on Dec 31, 2022. The long-term debt amounted to $1,537.3 million, down from $1,547 million as of Dec 31, 2022.
During the quarter under discussion, PAG repurchased 0.1 million shares of common stock for $14.1 million. As of Sep 30, 2023, $233.1 million of stock repurchase authorization remained outstanding.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision flatlined during the past month.
The consensus estimate has shifted 6.82% due to these changes.
VGM Scores
At this time, Penske has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. Following the exact same course, 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
Penske has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Penske Automotive Group, Inc. (PAG) : Free Stock Analysis Report
