Penske (PAG) Projects High Class 8 Sales Amid Competition

On Aug 28, we issued an updated research report on Penske Automotive Group, Inc. (NYSE:PAG) .

Penske Automotive reported adjusted earnings per share of $1.27 in the second quarter of 2017, surpassing the Zacks Consensus Estimate of $1.20. Including the foreign exchange impact, earnings per share were at $1.23. Revenues rose 2.5% year over year to $5.38 billion, steering past the Zacks Consensus Estimate of $5.33 billion. Excluding foreign exchange, revenues increased 6.6%, driven by the 4.2% rise in total retail automotive sales to 130,127 units.

Earnings estimates for Penske Automotive have been going down of late. In the last 30 days, estimates for the third quarter have moved down to $1.10.

Penske Automotive Group, Inc. Price and Consensus

In second-quarter 2017, the company improved full-year projection of the Commercial Truck market segment. The overall Class 8 market is expected to be stronger with growing demand in the market and stabilized prices.

Penske Automotive also aims to boost earnings by expanding dealership network. The latest in April saw the company having acquired a new Mercedes-Benz and Sprinter dealership in Phoenix, AZ. This buyout is expected to generate around $250 million in annual revenues. The company has also expanded its retail commercial truck dealership business in Toronto, Canada and has purchased six locations representing Freightliner and Western Star brands.

However, the company’s business is exposed to fluctuations in foreign exchange rates. In addition, its status is affected by the economic and political conditions of markets outside the United States.

Penske Automotive also competes with other franchised automotive dealerships, which might lower selling prices, affecting the company’s profits in the process.

Price Performance

Penske Automotive’s stock has slumped 22.8% year to date, massively underperforming the 10.2% decline of the industry it belongs to.

Zacks Rank & Other Key Picks

Penske Automotive currently holds a Zacks Rank #3 (Hold).

A few better-ranked automobile stocks are Allison Transmission Holdings Inc. (NYSE:ALSN) , Ferrari N.V. (NYSE:RACE) and Volkswagen (DE:VOWG_p) AG (OTC:VLKAY) , all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has a long-term growth rate of 11%.

Ferrari has an expected long-term earnings growth rate of 14.1%.

Volkswagen has a long-term growth rate of 8.9%.

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