Penske Automotive Group
PAG
recently released preliminary results for the second quarter of 2021 (ended Jun 30, 2021).
The auto retailer reported stellar second-quarter preliminary figures, driven by growth across all segments of the business. Some factors which contributed to the projected outperformance are robust volume and product margins, reopening of the U.K. market, its second largest market, the expanding Class 8 commercial truck market, breakthrough performance at Penske Transportation Solutions and continuous cost-containment initiatives.
In fact, amid the ongoing global chip shortage grappling the auto sector, Penske’s diversified business model significantly aided the company during the quarter under review.
For the quarter in discussion, Penske anticipates earnings before taxes to be more than $450 million, income from continuing operations to exceed $325 million and related earnings per share to be more than $4, each marking a whopping jump of more than 600% from the year-ago period. Moreover, when compared to the three-month period ended Jun 30, 2019, earnings before taxes, income from continuing operations and related earnings per share are projected to be up more than 175%.
These preliminary figures include a net charge of roughly $13 million i.e. 16 cents per share, in relation to the previously-completed redemption of the company’s $500-million 5.5% senior subordinated notes due 2026, with $500-million 3.75% senior subordinated notes due 2029.
However, these projected results are based on preliminary information, and are subject to change following completion of the quarter-end audit process. Additionally, the comprehensive financial statements for the second quarter will be released by the company on Jul 28.
Headquartered in Michigan, Penske is a diversified international transportation services company that operates automotive and commercial truck dealerships primarily in the United States, the U.K., Canada, and Western Europe.
The firm has become one of the largest dealership groups for Freightliner in North America, with the acquisition of Warner Truck Centers, representing six dealership locations in Utah and Idaho, including a flagship operation in Salt Lake City. The acquisition of Warner Truck Centers nearly doubled its retail commercial truck dealership revenues and accelerated the company’s diversification, while opening up opportunities for growth and increased profitability. The buyout of Kansas City Freightliner is set to expand Penske’s Premier Truck Group (PTG) arm’s scale with the addition of five full-service dealerships, four parts and service centers, as well as two collision centers. This acquisition is likely to generate $450 million in annualized revenues. The recent acquisition of Mercedes-Benz of South Charlotte will help Penske penetrate into the North Carolina market area. The acquisition is projected to add $150 million in annualized revenues. With the transaction’s completion, Penske has added more than $700 million in projected annualized revenues this year as the company thrives to achieve its target of reaching $1 billion in earnings before taxes in 2023.
Moreover, social-distancing and sanitization measures brought on by the coronavirus pandemic have prompted dealerships to find ways for conducting businesses remotely. In such a scenario, rising e-commerce initiatives are helping Penske Automotive boost its sales. The firm’s move to enhance its digital performance rates, and increased online sales through home delivery and clicks and collect initiatives have helped generate revenues.
Penske engages in share buybacks in almost every quarter which boosts investors’ confidence. It also hiked its dividend payout in May this year, further bolstering investors’ confidence.
Zacks Rank & Other Stocks to Consider
Penske currently carries a Zacks Rank #2 (Buy). Shares of the company have appreciated 32.6%, year to date, outperforming the
industry
’s rise of 28.5%.
Image Source: Zacks Investment Research
Some other top-ranked stocks in the auto sector are
General Motors
GM
,
BRP Inc.
DOOO
and
Harley-Davidson
HOG
, all of which sport a Zacks Rank of 1 (Strong Buy), at present. You can see
the complete list of today’s Zacks #1 Rank stocks here.
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