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A month has gone by since the last earnings report for Penske Automotive (PAG). Shares have added about 5.2% 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 Automotive's Q2 Earnings Surpass Estimates
Penske reported second-quarter 2020 adjusted earnings per share of 56 cents, beating the Zacks Consensus Estimate of 55 cents. However, the bottom line declined from the $1.42 per share recorded in the year-ago quarter. The auto retailer posted revenues of $3,651.1 million, missing the consensus mark of $3,798 million. The top line also declined from the year-ago level of $5,755.8 million. Heightened coronavirus woesresulted in dismal earnings and revenue numbers.
The company’s gross profit decreased to $552.9 million from the prior-year quarter’s $867.8 million. During the second quarter, operating income plummeted 58.4% from the prior-year period to $71.4 million.
Same-store retail unit sales plunged 41.1% year over year to 72,916. Within the retail automotive segment, new vehicle revenues fell 38.8% year over year to $1,384.7 million and used-vehicle revenues declined 36% to $1,159.6 million.
Revenues in Retail Automotive slipped to $3,153.5 million from the year-ago quarter’s $5,196.3 million. Gross profit of $466.3 million compared unfavorably with the $774.9 million reported in second-quarter 2019.
In the June-end quarter, revenues in the Retail Commercial Trucks segment decreased to $399.2 million from the year-ago period $426.8 million. Gross profit for the segment was $60.2 million, up from the year-ago quarter’s figure of $58.5 million.
Revenues in the Commercial Vehicles Australia/Power Systems and Other declined to $98.4 million from the $132.7 million generated in the prior-year quarter. Gross profit came in at $26.4 million compared with the $34.4 million witnessed in second-quarter 2019.
Penske had cash and cash equivalents of $159.3 million as of Jun 30, 2020, up from $28.1 million as of Dec 31, 2019. As of Jun 30, 2020, long-term debt amounted to $2,054.1 million, down from $2,257 million as of Dec 31, 2019. For six months ended Jun 30, 2020, the company had free cash flow of $427.8 million.
Dividends &Share Repurchase
During the April-June quarter, the company suspended its cash dividends to help mitigate the impact of the coronavirus pandemic.
The company repurchased 1,023,288 shares as of Jun 30, 2020 for $34.2 million. As of Jun 30, 2020, Penske had a share-repurchase authorization of $170.6 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 32.5% due to these changes.
Currently, 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.
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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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