Penske profit beats but stock falls
(Reuters) - Penske Automotive Group Inc (PAG.N), the No. 2 U.S. car dealership group, posted a stronger-than-expected quarterly profit on Friday, but shares fell more than 2 percent as gross margins and vehicle pricing disappointed.
Morgan Stanley analyst Ravi Shanker in a research note credited lower taxes for the better-than-expected results, saying they added 7 cents a share. Gross margins of 2.6 percent came in below his forecast of 2.8 percent.
Chairman Roger Penske said in a statement that pricing pressure had increased in the quarter. Average prices fell about 4 percent for new vehicles sold and 5 percent for used ones. Shanker said pricing was weaker than expected.
Net income in the third quarter fell to $41 million, or 45 cents a share, compared with $55.7 million, or 61 cents a share, a year earlier.
Excluding one-time items, Penske earned 60 cents a share, 3 cents more than what analysts polled by Thomson Reuters I/B/E/S had expected.
Penske, which relies heavily on German brands, including BMW (BMWG.DE), said revenue had risen 17 percent to $3.4 billion, above the $3.27 billion that analysts had expected. Retail sales at stores open at least a year rose almost 12 percent, while retail sales of vehicles jumped 24 percent.
Vehicle sales rose 21 percent in the United States and 29 percent overseas. The U.S. market accounted for 63 percent of revenue.
New vehicle sales, which account for about half the company's revenue, were up 26 percent, and used vehicle sales rose 20 percent.
Penske, based in suburban Detroit, has 171 franchises in the United States and Puerto Rico, and 170 outside the United States, mostly in Britain.
Penske shares were down 2.2 percent at $30.91 on Friday morning on the New York Stock Exchange.