Penske Automotive tops Q2 earnings estimates as service revenue rises

Investing.com -- Penske Automotive Group (NYSE:PAG) on Wednesday reported second-quarter earnings that exceeded analyst expectations, driven by strong performance in its service and parts business despite flat overall revenue.

The international transportation services company posted earnings of $3.78 per share for the second quarter, surpassing the analyst consensus of $3.59 by $0.19.

Quarterly revenue remained flat at $7.7 billion compared to the same period last year, falling short of analyst estimates of $7.92 billion. Net income attributable to common stockholders increased 4% to $250.0 million from $241.2 million in the prior year period.

The company’s performance was bolstered by record gross profit, which increased 3% to $1.3 billion, with overall gross margin improving by 50 basis points to 16.9%.

Notably, retail automotive service and parts revenue grew 8% to a record level, with related gross profit up 9%.

"I am pleased with the performance of our diversified international transportation services business in the second quarter," said Chair Roger Penske.

"The second quarter represented the third consecutive quarter of year-over-year earnings growth driven by an overall gross margin increase of 50 basis points, an increase of 50 basis points in retail automotive service and parts gross margin, and a 30-basis point improvement in selling, general and administrative expenses as a percentage of gross profit."

The company’s retail automotive same-store revenue decreased 1% YoY, with new vehicle sales down 2%, used vehicle sales down 1%, and finance and insurance revenue down 2%.

However, same-store gross profit increased 3%, with used vehicle gross profit up 8% and service and parts gross profit up 9%, offsetting a 4% decline in new vehicle gross profit.

Penske’s retail commercial truck business saw a 2% increase in unit sales and a 6% rise in revenue to $943.6 million.

The company’s investment in Penske Transportation Solutions contributed $53.5 million in earnings, up slightly from $52.9 million in the same period last year.

During the quarter, Penske repurchased 630,000 shares and has bought back 885,000 shares year-to-date.

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