Penske Automotive Group, Inc. (PAG) reported a profit of $31.3 million or 34 cents per share in the third quarter of the year, which was flat compared to the year-ago level of $31.1 million or 34 cents per share (excluding special items). The profit was higher than the Zacks Consensus Estimate by a penny.
The company failed to show any significant improvement in profit due to the challenging environment in the new retail vehicle market and unfavorable comparison with the positive impact from various incentive programs launched by the countries in which the company markets its vehicles.
Revenues in the quarter increased 6.5% to $2.76 billion, driven by a 4.7% rise in total retail unit sales. Same-store retail revenue inched up 3.8% to $2.5 billion. Excluding exchange rate fluctuations, same-store retail revenues rose 6% on a year-over-year basis. Same-store retail sales increased 4.2% in the U.S. and 3.1% in the international market.
New Vehicle revenues grew 5.8% to $1.42 billion despite a 2.6% fall in sales to 40,504 units. The decline in new vehicle unit sales was attributable to the unfavorable comparison with the benefit from highly successful government incentive programs in the U.S., U.K. and Germany last year.
Used Vehicle revenues went up 13.5% to $765.6 million based on a 16.5% increase in sales to 29,975 units (including a 20.6% increase in retail used unit sales in the U.S.). Revenues remained almost flat at $335.3 million in the Service and Parts segment compared to $335.6 million in the prior year.
Meanwhile, revenues increased 10.1% to $156.5 million in the Fleet and Wholesale Vehicle segment and 10.3% to $67.1 million in the Finance and Insurance segment. However, revenues in the Distribution segment more than halved to $15.3 million from $36.5 million a year ago.
Penske wholesaled 1,165 units of smart USA vehicles during the quarter, down from 3,401 units in the third quarter of 2009. Smart USA recognized after-tax expense of $900,000 or 1 cent per share during the quarter due to the launch of finance and marketing campaigns designed to sell through the balance of the 2010 model year inventory.
Penske had cash and cash equivalents of $6 million as of September 30, 2010, a decline from $14 million as of December 31, 2009. Long-term debt amounted to $853.4 million as of that date, which was lower than $946.4 million as of December 31, 2009. Consequently, long-term debt to capitalization ratio fell to 45.5% from 50% as of December 31, 2009.
Penske’s product mix, which includes a wide range of imported and luxury brands, helps it to maintain a strong foothold in both the U.S. and overseas markets, including Europe. However, the company still faces a challenging new vehicle market.
In addition, poor sales of smart USA vehicles continue to hamper the company’s Distribution segment. Therefore, the company has a Zacks #4 Rank on its stock, which translated to a recommendation of Sell for the short term (1–3 months).
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