Penske Auto Group 3Q Net Up 24% On Margin Gains, Cost Cuts

Penske Automotive Group Inc.'s (PAG) third-quarter profit rose 24% on higher margins and lower costs as the company also got a sales boost from the government's cash-for-clunkers program.

"Our retail operations performed well," said Chairman Roger Penske as he called cash-for-clunkers "a welcome boost to our U.S. business." He added the company's "U.K. operation continues to outperform in its market."

Thursday, Penske rival AutoNation Inc. (AN), the largest U.S. car-dealership chain, swung to a third-quarter profit, helped by cost reductions. Earlier this week, executives of Group 1 Automotive Inc. (GPI) and Sonic Automotive Inc. (SAH) expressed optimism that a recovery is near.

The industry has slashed costs and reduced inventory, but unlike auto manufacturers, retailers largely have the advantage of used-vehicle sales and profitable parts and services departments.

Penske posted profit of $27.4 million, or 30 cents a share, up from $22.4 million, or 24 cents a share, a year earlier. Earnings excluding restructuring and other impacts such as a $1.9 million loss from its failed bid to acquire the Saturn brand rose to 34 cents from 28 cents.

Revenue decreased 13% to $2.59 billion, with same-store retail sales down 12%, or 8% excluding currency changes.

Analysts surveyed by Thomson Reuters expected earnings of 28 cents on revenue of $2.56 billion.

Gross margin rose to 16.3% from 15.4%, with used-vehicle margins jumping to 8.8% from 7.3%.

Penske early this month abandoned a plan to buy General Motors Co.'s slumping Saturn unit. The deal collapsed after Penske failed to get France's Renault SA (RNO.FR) to agree to supply autos.

Penske's shares closed Thursday at $16.99 and didn't trade premarket.

-By Mike Barris and Kevin Kingsbury, Dow Jones Newswires; 212-416-2330; [e-mail]