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Here's Why Penske (PAG) Deserves a Place in Your Portfolio
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Penske Automotive (PAG - Free Report) is currently benefiting from high demand for vehicles amid preference for personal mobility. Also, higher average prices of vehicles owing to supply-demand mismatch — thanks to the global shortage of semiconductor supply — are aiding the auto retailer’s top line.
Penske has become the largest dealership group for Freightliner in North America with the acquisition of Warner Truck Centers. This aided the company to diversify business, expand the customer base and capitalize on the Retail Commercial Trucks segment. The long-term expected EPS growth rate of PAG is 20%.
Shares of PAG have surged roughly 42% over the past six months, outperforming the industry’s 10.3% growth. We believe that the company is well positioned to maintain its upward trajectory.
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PAG is riding high on strategic buyouts. The buyout of Kansas City Freightliner, completed during second-quarter 2021, is expected to add $450 million to Penske’s annualized revenues. In October, Penske acquired the remaining 51% of its Japan-based joint venture of premium luxury automotive brands, which is likely to add $250 million in consolidated annual revenues. In November, PAG acquired McCoy Freightliner, a retailer of medium and heavy-duty commercial trucks located in Oregon. Roughly $200 million in annualized revenues are expected to be generated from the acquisition. The buyout seeks to scale up the company's wholly-owned subsidiary, Premier Truck Group.
Further, the Penske Transportation Solutions (PTS) joint venture has been boosting the prospects of Penske Automotive — which holds 28.9% in PTS. In the last reported quarter, PTS generated $2.9 billion in revenues. The acquisition of Black Horse Carriers — completed early last year — is expected to have added at least $600 million in revenues for PTS in 2021.
As part of the firm’s used-vehicle expansion, Penske’s U.S. supercenters have been rebranded as CarShop. Penske is on track to step up CarShop’s footprint from its current 22 locations to 40 by the end of 2023, thereby generating at least $150,000 in unit sales and $2.5-$3 billion in total revenues. The expansion of digital capabilities has been aiding the firm. Digital tools available on www.carshop.com are providing a comprehensive and seamless online shopping experience to customers.
Encouragingly, Penske surpassed earnings estimates in the last four quarters, with the average being 20.3%. Thanks to solid earnings and cash flow generation, Penske remains committed to increase shareholders’ value. In 2021, the company hiked its quarterly dividend four times. From the onset of 2021 through Oct 27, Penske bought back 2.5 million shares. The company's ROE of 30.4% compares favorably with the auto sector’s 19%, signaling management's efficiency in rewarding shareholders.
With so much going in favor of the stock, Penske is viewed as a solid bet at the moment. It currently carries a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities to investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
2 Other Auto Retailers to Tap On
Asbury Automotive (ABG - Free Report) : Asbury has an expected earnings growth rate of 13.05% for 2022. The Zacks Consensus Estimate for its 2022 earnings has been revised upward by 4 cents in the past 60 days.
Asbury’s earnings beat the Zacks Consensus Estimate in the last four quarters, delivering a surprise of 24.3%, on average. ABG has edged up7.7% in the past year.
AutoNation (AN - Free Report) : AutoNation has an expected earnings growth rate of 1.2% for 2022. The Zacks Consensus Estimate for its 2022 earnings has been revised upward by 8 cents in the past 60 days.
AutoNation’s earnings beat the Zacks Consensus Estimate in the last four quarters, delivering a surprise of 40.9%, on average. AN has surged 50% in the past year.
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Here's Why Penske (PAG) Deserves a Place in Your Portfolio
Penske Automotive (PAG - Free Report) is currently benefiting from high demand for vehicles amid preference for personal mobility. Also, higher average prices of vehicles owing to supply-demand mismatch — thanks to the global shortage of semiconductor supply — are aiding the auto retailer’s top line.
Penske has become the largest dealership group for Freightliner in North America with the acquisition of Warner Truck Centers. This aided the company to diversify business, expand the customer base and capitalize on the Retail Commercial Trucks segment. The long-term expected EPS growth rate of PAG is 20%.
Shares of PAG have surged roughly 42% over the past six months, outperforming the industry’s 10.3% growth. We believe that the company is well positioned to maintain its upward trajectory.
PAG is riding high on strategic buyouts. The buyout of Kansas City Freightliner, completed during second-quarter 2021, is expected to add $450 million to Penske’s annualized revenues. In October, Penske acquired the remaining 51% of its Japan-based joint venture of premium luxury automotive brands, which is likely to add $250 million in consolidated annual revenues. In November, PAG acquired McCoy Freightliner, a retailer of medium and heavy-duty commercial trucks located in Oregon. Roughly $200 million in annualized revenues are expected to be generated from the acquisition. The buyout seeks to scale up the company's wholly-owned subsidiary, Premier Truck Group.
Further, the Penske Transportation Solutions (PTS) joint venture has been boosting the prospects of Penske Automotive — which holds 28.9% in PTS. In the last reported quarter, PTS generated $2.9 billion in revenues. The acquisition of Black Horse Carriers — completed early last year — is expected to have added at least $600 million in revenues for PTS in 2021.
As part of the firm’s used-vehicle expansion, Penske’s U.S. supercenters have been rebranded as CarShop. Penske is on track to step up CarShop’s footprint from its current 22 locations to 40 by the end of 2023, thereby generating at least $150,000 in unit sales and $2.5-$3 billion in total revenues. The expansion of digital capabilities has been aiding the firm. Digital tools available on www.carshop.com are providing a comprehensive and seamless online shopping experience to customers.
Encouragingly, Penske surpassed earnings estimates in the last four quarters, with the average being 20.3%. Thanks to solid earnings and cash flow generation, Penske remains committed to increase shareholders’ value. In 2021, the company hiked its quarterly dividend four times. From the onset of 2021 through Oct 27, Penske bought back 2.5 million shares. The company's ROE of 30.4% compares favorably with the auto sector’s 19%, signaling management's efficiency in rewarding shareholders.
With so much going in favor of the stock, Penske is viewed as a solid bet at the moment. It currently carries a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities to investors. You can see the complete list of today’s Zacks #1 Rank stocks here.
2 Other Auto Retailers to Tap On
Asbury Automotive (ABG - Free Report) : Asbury has an expected earnings growth rate of 13.05% for 2022. The Zacks Consensus Estimate for its 2022 earnings has been revised upward by 4 cents in the past 60 days.
Asbury’s earnings beat the Zacks Consensus Estimate in the last four quarters, delivering a surprise of 24.3%, on average. ABG has edged up7.7% in the past year.
AutoNation (AN - Free Report) : AutoNation has an expected earnings growth rate of 1.2% for 2022. The Zacks Consensus Estimate for its 2022 earnings has been revised upward by 8 cents in the past 60 days.
AutoNation’s earnings beat the Zacks Consensus Estimate in the last four quarters, delivering a surprise of 40.9%, on average. AN has surged 50% in the past year.