Penske Automotive Group (NYSE: PAG) announced today record Q3 and nine-month results. For the three months ended 30 September 2016, income from continuing operations attributable to common shareholders increased 1% to $87.4 million. Related earnings per share increased 7.3% to $1.03, when compared to the same period last year. Total automotive retail units increased 5.8% to118,522. Total revenue increased 3.9% to $5.2 billion. Excluding foreign exchange problems, total revenue increased 9.7%.
However, same-store retail revenue declined -2.0%. Excluding foreign exchange, same-store retail revenue increased 4.1%. Foreign exchange rates negatively impacted earnings per share attributable to common shareholders by -$0.07 for the three months.
“Our business continued to perform well in the third quarter, producing another quarter of record results despite the translation effects from foreign currency headwinds,” said Penske Automotive Group Chairman Roger S. Penske. “I was particularly pleased to see new and used gross profit per unit increase in the U.S. by $52 and $179, respectively. Further, the Brexit vote in the U.K. did not impact the company’s performance in the third quarter as our business remained strong, generating a 6.9% increase in their same-store unit volume.”
For the nine months ended 30 September 2016, total revenue increased 6.0% to $15.2 billion. Excluding foreign exchange, total revenue increased 9.6% to $15.7 billion. Total automotive retail unit volume increased 7.2%, including 0.1% on a same-store basis. Income from continuing operations attributable to common shareholders increased 1.8% to $261.4 million and related earnings per share increased 6.3% to $3.03 when compared to the same period last year. Foreign exchange rates negatively impacted earnings per share attributable to common shareholders by -$0.13.
Retail Commercial Truck Operations
The company operates nineteen locations, including fourteen full-service dealerships, under the “Premier Truck Group” brand, offering primarily Freightliner and Western Star. For the three months and nine months ended 30 September 2016, Premier Truck Group retailed 1,894 and 5,548 units, generated $266.1 million and $782.3 million of revenue, and $38.2 million and $109.7 million of gross profit, respectively. This was from the retail sale of new/used medium and heavy-duty trucks and service/parts sales. Service and parts gross profit represents approximately 78.5% and 78.1% of total Premier Truck Group gross profit for the three and nine months ended 30 September 2016, respectively.
Acquisitions
As previously announced, in October 2016, the company expanded its presence in the northern Italy market of Bologna with the acquisition of six franchises (3 Porsche, Audi, Land Rover and Volvo), which are expected to generate approximately $200 million in revenue on an annualized basis. During July 2016, the company acquired twelve franchises (7 VW, Audi, BMW, MINI, SEAT, Skoda) in the U.K., which are expected to generate approximately $250 million in revenue on an annualized basis.
Also, as previously announced, in July 2016, the company acquired an additional 14.4% interest in Penske Truck Leasing Co., (“PTL”), from subsidiaries of GE Capital Global Holdings, LLC and now holds a 23.4% ownership interest and will continue to account for the ownership interest using the equity method of accounting. By acquiring the additional interest in PTL, the company expects to realize accretion to earnings per share and additional cash flow from cash tax savings and the annual cash distributions PTL provides to its partners. Penske estimates the transaction will provide at least $0.25 per share in earnings accretion on an annualized basis as well as significant cash tax savings heavily weighted to the first few years of the investment.
