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Jan 23, 2015 Value Line Commentary

Penske Automotive's revenues are likely to advance at least 25% over the two-year period ending December, 2015. Following impressive same-store sales gains of above 11% at both the new-vehicle segment and used-car retail unit in 2013, this metric was up 11.3% and 17.0%, respectively, in the first nine months of 2014. A broader range of warranties for used cars and the company's enhanced Internet site appear to be prime catalysts for this momentum. Moreover, revenues generated by the finance and insurance unit were 19% above the prior year's level, and near-term growth prospects here are bright. Finally, contributions from dealership openings and the latest acquisition (discussed below) should contribute meaningfully to 2015's top line, while same-store sales increases will likely moderate a bit.

The company's overseas operations should continue to fare well in the coming years. Its sizable U.K. business has rebounded strongly since mid-2013, highlighted by volume levels not seen since 2008. The country's year-to-year increase in new registrations of almost 15% in 2014's first three quarters augurs well for Penske's operations there. Same-store units for its overall international units were up 12.4%. Its overall international total same-store and foreign-based revenues now account for about 40% of the company's total. Penske's latest acquisition is particularly promising.

On November 4th, it completed the purchase of a majority stake in a heavy- and medium-duty truck dealership that has operations in three western states and should boost 2015's share net by about $0.10. Management indicated that the sizable truck dealership industry, which has few major players, provides an excellent opportunity for Penske to build scale through additional such purchases. Too, these dealerships command relatively high margins, particularly in regard to parts and service. This stock has a Timeliness rank of 1 (Highest). Too, given Penske's...