December 1, 2020

SMP

Penske Automotive Group, Inc. (PAG Free Report) reported first-quarter 2020 adjusted earnings per share of 64 cents, in line with the Zacks Consensus Estimate. However, the bottom line declined from $1.25 per share recorded in the year-ago quarter. The auto retailer posted revenues of $5,009.1 million, surpassing the consensus mark of $4,868 million. However, the top line declined from the year-ago level of $5,564 million. Heightened coronavirus woes, especially in March, resulted in weaker year-over-year earnings and revenues. 

The company’s gross profit decreased to $776.7 million from $851.5 million in the prior-year quarter. During the quarter under review, operating income fell 33% from the prior-year period to $106.4 million.

Same-store retail unit sales tanked 14.5% year over year to 104,870. Within the retail automotive segment, new-vehicle revenues fell 14.3% year over year to $1,863.5 million and used-vehicle revenues declined 11.3% to $1,597.6 million.

Segmental Details

Revenues in Retail Automotive slipped to $4,416.6 million from $5,091.2 million in the year-ago quarter. Gross profit of $678.1 million compared unfavorably with $761.5 million in first-quarter 2019. However, the metric topped the Zacks Consensus Estimate of $617 million.

In the quarter, revenues in the Retail Commercial Trucks segment increased to $491.4 million from $332.3 million in the year-ago period. Gross profit for the segment was $68.8 million, which beat the Zacks Consensus Estimate of $68 million. Further, it increased from the year-ago figure of $54.4 million in the quarter.

Revenues in the Commercial Vehicles Australia/Power Systems and Other declined to $101.1 million from $140.9 million in the prior-year quarter. Gross profit was $29.8 million compared with $35.6 million in the first quarter of 2019. The reported figure also missed the Zacks Consensus Estimate of $34.20 million.

Financial Position

Penske Automotive had cash and cash equivalents of $431.9 million as of Mar 31, 2020, up from $28.1 million on Dec 31, 2019. As of Mar 31, 2020, long-term debt amounted to $2,516.1 million, up from $2,257 million on Dec 31, 2019.

Share Repurchase

During the quarter under review, the company repurchased 890,195 shares for $29.4 million or an average of $33.06 per share. As of Mar 31, 2020, Penske Automotive had a share repurchase authorization of $170.6 million.

Actions Amid COVID-19

To counter the pandemic-led crisis, the company has enforced a variety of measures including company-wide hiring freeze, substantial cost cuts, staffing-level adjustments, postponement of $150 million in capex and negotiated rent deferrals at different locations for up to 90 days.

Additionally, executive and management compensation has been drastically slashed, including a 100% pay cut for the CEO and president during the crisis. The board of directors has also suspended cash compensation through September-end of this year.

Zacks Rank & Stocks to Consider

Currently, Penske Automotive carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the auto space include Modine Manufacturing Company (MOD Free Report) , Unique Fabricating Inc. (UFAB Free Report) and Veoneer Inc. (VNE Free Report) , each carrying a Zacks Rank #2

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