It has been about a month since the last earnings report for Penske Automotive Group, Inc. PAG. Shares have lost about 4.4% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 (PAG) Beats Earnings Estimates in Q4
Penske Automotive’s earnings per share improved 12.3% to $0.91 from $0.81 recorded a year ago. Moreover, earnings surpassed the Zacks Consensus Estimate of $0.87.
Net income rose 16% to $82.7 million in the reported quarter from $71.3 million a year ago. Income from continuing operations increased 6.5% to $77.4 million in the reported quarter from $72.7 million a year ago.
Revenues dipped 0.7% year over year to $4.88 billion, missing the Zacks Consensus Estimate of $4.98 billion. Excluding foreign exchange, total revenue increased 5.7%, driven by a 1.8% rise in total retail automotive sales to 112,129 units.
Same-store retail revenues declined 3.8%. Same-store retail automotive revenues dipped 4.4% to $4.34 billion.
Gross profit increased 1% to $727.3 million from $717.1 million in the fourth-quarter 2015. Operating income dipped 0.7% to $125.2 million from $126.1 million a year ago.
2016 Performance
Earnings for 2016 increased 7.1% to $3.93 per share from $3.67 in 2015. The figure also beat the Zacks Consensus Estimate of $3.91.
Revenues for 2016 rose 4.3% to $20.11 billion, marginally missing the Zacks Consensus Estimate of $20.17 billion.
Segment Performance
The company operates under three reportable segments – Retail Automotive, Retail Commercial Trucks, and Commercial Vehicles Australia/Power Systems and Other.
Revenues from Retail Automotive inched down 0.4% to $4.55 billion in the reported quarter.
Revenues from Retail Commercial Trucks decreased 9.4% to $218.4 million from $241 million recorded in the year-ago quarter.
Revenues from Commercial Vehicles Australia/Power Systems and Other increased 5.8% to $118 million in the reported quarter.
Financial Position
Penske Automotive had cash and cash equivalents of $24 million as of Dec 31, 2016, down from $62.4 million as of Dec 31, 2015. Long-term debt was $1.87 billion as of Dec 31, 2016, up from $1.28 billion as of Dec 31, 2015.
Acquisition Update
In 2016, Penske Automotive acquired or opened new dealerships which will generate annual revenues of $700 million.
In Jan 2017, the company completed the CarSense acquisition that was announced in Dec 2016. The company expects this buyout to drive annual revenues by around $350 million along with earnings accretion of around $0.07 to $0.09 per share annually. Penske Automotive expects this buyout to diversify its business and expand its customer base. It will also help the company capitalize on the highly fragmented used automotive retail segment.
In Jan 2017, Penske Automotive signed a deal to acquire the leading retailer of used vehicles in the U.K. – CarShop. The company expects CarShop to generate annual revenues of around $340 million along with earnings accretion of roughly $0.07 to $0.09 per share annually. The acquisition is expected to close in the first quarter of 2017, subject to certain conditions.
Share Repurchase
In 2016, Penske Automotive acquired 4.5 million shares for $167.9 million. As of Dec 31, 2016, the company has $32.1 million remaining under its share repurchase authorization.