The automotive industry has been recovering from its pandemic-driven lows, as evidenced by its solid sales growth in the first quarter. While the industry is currently grappling with a global semiconductor shortage, President Biden’s proposed $50 billion investment in semiconductor manufacturing and research and development, under the CHIPS for America Act, should boost the production levels significantly. There have also been private investments to address the semiconductor shortage issue…
Global automotive sales are expected to rise 8%-10% year-over-year to 83-85 million units in 2021.
Given this backdrop, Wall Street analysts expect cheap automotive stocks Penske Automotive Group, Inc. (PAG – Get Rating), Asbury Automotive Group Inc. (ABG – Get Rating), and Group 1 Automotive, Inc. (GPI – Get Rating) to rally in the coming months.
PAG is a diversified transportation services company that operates automotive and commercial truck dealerships internationally. The company, which is based in Bloomfield Hills, Mich., sells new and used motor vehicles and related products, vehicle and collision repair services, finance and lease contracts, third-party insurance products, and other aftermarket products.
Last month PAG entered the Charlotte, North Carolina market area with the acquisition of Mercedes-Benz of South Charlotte. The company expects to add $150 million in annualized revenue from the new market area with growing demand. With the completion of this acquisition, PAG has added more $700 million in expected annualized revenue to its operations this year, on its way to its target goal of $1 billion in earnings before taxes in 2023.
On April 13, PAG and its commercial vehicle subsidiary Premier Truck Group (PTG) completed the acquisition of Kansas City Freightliner (KCFL), a retailer of medium- and heavy-duty commercial trucks. The acquisition will further scale PTG business by providing services to the customers of both companies and is expected to generate $450 million in annualized revenue.
For its fiscal first quarter, ended March 31, 2021, PAG’s revenue increased 15.3% year-over-year to $5.77 billion. The company’s gross profit increased 17.6% year-over-year to $913.20 million. Its operating income came in at $219.60 million, up 106.4% from its prior-year period. PAG’s net income is reported at $182.50 million for the quarter, which represents a 253% rise year-over-year. Its EPS increased 253.1% year-over-year to $2.26. As of March 31, 2021, the company had $94.6 million in cash and cash equivalents.
Analysts expect the company’s revenue to increase 10.8% for the current quarter, ending September 30, 2021, to $6.62 billion. The stock surpassed the Street’s EPS estimates in each of the trailing four quarters. PAG’s EPS is expected to grow at a 9.3% rate per annum over the next five years.
In terms of non-GAAP forward P/E, PAG is currently trading at 8.54x, which is 50.2% lower than the 17.13x industry average. In terms of forward Price/Sales, PAG is currently trading at 0.25x, 81.5% lower than the 1.34x industry average.
The stock has gained 92.8% over the past year and 56% over the past nine months. It closed yesterday’s trading session at $75.49.
All five Street analysts rating the stock have rated it ‘Buy.’ Furthermore, analysts expect the stock to hit $104.40 in the near term, which indicates a potential 38.3% upside .
PAG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Value, and a B grade for Growth, Momentum, and Sentiment. To see more of PAG’s component grades, click here. PAG is ranked #2 of 27 stocks in the B-rated Auto Dealers & Rentals industry.
ABG is an automotive retailer that operates franchises and dealership locations. The company offers new and used vehicles, finance and insurance products, vehicle maintenance and repair services, replacement parts, and service contracts. It offers dealerships for luxury and mid-line import brands. ABG is based in Duluth, Ga.
ABG’s total revenue came in at $2.19 billion for the fiscal first quarter, ended March 31, 2021, which represents a 36.4% improvement year-over-year. The company’s gross profit was $382.70 million, up 40.5% from the prior-year period. Its adjusted income from operations has been reported at $133.50 million for the quarter, which represents a 95.2% year-over-year improvement. ABG’s adjusted net income increased 161.4% year-over-year to $90.70 million. Its adjusted EPS increased 160% year-over-year to $4.68. As of March 31, 2021, ABG had $27.80 million in cash and cash equivalents.
Analysts expect ABG’s EPS to…
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