Penske Automotive Group Inc. (PAG) posted a whopping 52% increase in profit to $29.5 million or 32 cents per share (excluding a net after-tax gain) in the fourth quarter of 2010 from $19.4 million or 21 cents per share in the corresponding quarter of previous year. With this, the company also beats the Zacks Consensus Estimate of 26 cents per share.
The higher profit was attributable to an improvement in retail environment in the U.S. as reflected in a 9.4% increase in same store retail units to 64,043 vehicles and a 9.1% rise in same store retail revenues to $2.5 million. Same store retail sales increased 13.5% in the U.S. and 2.0% in the international market.
Revenues in the quarter grew 13.5% to $2.8 billion, driven by a 14% rise in total retail sales to 66,738 units. It was higher than the Zacks Consensus Estimate of $2.6 billion. Total retail units rose 18.9% in the U.S. and 3.7% in the international market.
New Vehicle revenues appreciated 16% to $1.5 billion on an 11% rise in sales to 39,033 units. Used Vehicle revenues went up 12% to $728.4 million based on an 18% increase in sales to 27,705 units. Revenues in the Service and Parts segment rose 6% to $342.8 million.
Meanwhile, revenues in the Fleet and Wholesale Vehicle segment increased 20% to $175.5 million and 6% to $61.8 million in the Finance and Insurance segment. However, revenues in the Distribution segment dipped 13% to $8.2 million.
Penske wholesaled 884 units of smart USA vehicles during the quarter, down from 998 units in the fourth quarter of 2009. Smart USA distribution business recorded after-tax losses of $5.8 million (6 cents per share) and $15.9 million (17 cents per share) in the quarter and in the year ended December 31, 2010, respectively.
For full year 2010, Penske reported a profit of $109.3 million or $1.19 per share (excluding a net after-tax gain) compared with $80.2 million or 87 cents per share in the prior year. Total revenue scaled up 13% to $10.7 billion during the year.
Penske had cash and cash equivalents of $16.6 million as of December 31, 2010, a decline from $14 million in the corresponding quarter-end of prior year. Long-term debt amounted to $779.9 million as of the above date, which was lower than $946.4 million as of December 31, 2009. Consequently, long-term debt to capitalization ratio fell to 43% from 50% as of December 31, 2009.
In 2010, Penske repurchased $155.7 million principal amount of its outstanding 3.5% Senior Subordinated Convertible Notes due 2026 for $156.6 million in cash. As of December 31, 2010, the company had $300.0 million of revolving credit available under its U.S. credit facility. It also has authorization to repurchase up to $150.0 million of its outstanding common stock, debt or convertible debt.
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 #3 Rank on its stock, which translated to a recommendation of Hold for the short term (1 to 3 months).
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