Penske Remains Neutral - Analyst Blog
March 01 2013 - 1:40PM
Zacks
On Feb 25, we maintained our Neutral recommendation on
Penske Automotive Group Inc. (PAG), despite the
challenging market condition for new and used cars and rising
competition from the retail and service centers owned by original
equipment manufacturers, due to its wide range of imported and
luxury brands, which helps it to maintain a strong foothold in the
U.S. and overseas markets.
Why Maintained?
Penske posted a 21.3% increase in profits to 57 cents per share in
the fourth quarter of 2012 from 47 cents in the same quarter of
2011. Profit per share exceeded the Zacks Consensus Estimate by 4
cents. Net profits increased 19.5% to $51.0 million in the quarter
from $42.7 million a year ago.
Revenues escalated 17.9% to $3.4 billion, including an 11.4% rise
in same-store retail revenues in the quarter. Revenues were
marginally higher than the Zacks Consensus Estimate of $3.3
billion.
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for fiscal 2013 increased 2.8% to $2.54 per
share. The Zacks Consensus Estimate for fiscal 2014 also went up
3.6% to $2.86 per share.
Penske benefits from its diversified revenue stream. A significant
portion of the company’s profit is derived from higher-margin
service and parts sales, which are less cyclical than retail
vehicle sales and thus provides stability to the company.
In addition, the company benefit from its expansion strategy. It
has expanded its global presence by closing accretive acquisitions
in Northern Ireland and Italy. It has also expanded its footprint
domestically by entering the Madison, WI market.
However, the company faces tough competition from the retail as
well as service centers owned by OEMs. In addition, the retail
vehicle market in the U.S. remains challenging for both new and
used car sales volume.
Other Stocks to Look For
Few stocks that are performing well in the industry where Penske
operates are Asbury Automotive Group, Inc. (ABG),
Lithia Motors Inc. (LAD) and America's
Car-Mart Inc. (CRMT). All these stocks carry a Zacks Rank
#2 (Buy).
ASBURY AUTO GRP (ABG): Free Stock Analysis Report
AMERICAS CAR-MT (CRMT): Free Stock Analysis Report
LITHIA MOTORS (LAD): Free Stock Analysis Report
PENSKE AUTO GRP (PAG): Free Stock Analysis Report
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