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Why Is Penske (PAG) Down 4.3% Since Last Earnings Report?

Zacks Equity Research

It has been about a month since the last earnings report for Penske Automotive (PAG). Shares have lost about 4.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Penske due for a breakout? 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 drivers.

Penske Automotive Earnings Surpass Estimates in Q1

Penske Automotive reported first-quarter 2019 adjusted earnings of $1.25 per share, which beat the Zacks Consensus Estimate of $1.24.

During the reported quarter, income from continuing operations attributable to common shares was $100.1 million compared with $108 million a year ago.

Total revenues declined 3.2% year over year to $5.56 billion, which missed the Zacks Consensus Estimate of $5.73 billion.

Same-store retail unit sale decreased 3.8% year over year to 124,725. Within the retail automotive segment, new-vehicle revenues declined 8.8% year over year to $2.2 billion while used-vehicle revenues fell 0.8% to $1.9 billion.

The company’s gross profit decreased to $851.5 million from $864.4 million in the prior-year quarter. During the quarter under review, operating income declined 9.7% to $158.7 million.

Segmental Performance

The company operates under three segments namely — Retail Automotive, Retail Commercial Trucks, and Commercial Vehicles Australia/Power Systems and Other.

Revenues from Retail Automotive decreased to $5.09 billion from $5.30 billion in the year-ago quarter.

Revenues from Retail Commercial Trucks increased to $332.3 million from $292.4 million in the year-ago quarter.

In the reported quarter, revenues from Commercial Vehicles Australia/Power Systems and Other declined to $140.9 million from $158.5 million a year ago.

Financial Position

Penske Automotive had cash and cash equivalents of $435 million as of Mar 31, 2019, marking an increase from $39.4 million recorded as of Dec 31, 2018. As of Mar 31, 2019, long-term debt was $2.1, similar to the figure as of Dec 31, 2018.

Share Repurchase

In first-quarter 2019, the company repurchased 1,258,348 shares for $54.3 million or average of $43.19 per share. As of Mar 31, 2019, it had roughly $145.7 million available under the existing share repurchase authorization.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Penske has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, 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 broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise 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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