Penske Automotive Group, Inc. PAG has signed a deal to acquire CarSense. The company expects this acquisition to generate annual revenues of around $350 million along with earnings accretion of around 7 cents to 9 cents per share annually.

The acquisition is expected to close in the first quarter of 2017, subject to customary conditions. Penske Automotive expects this buyout to diversify its business and help expand its customer base. It will also help the company capitalize on the highly fragmented used automotive retail segment.

CarSense is a stand-alone specialty retailer of used vehicles in the U.S. Starting 1997; CarSense has been operating in five locations. It mainly reconditions and retails high-quality used vehicles.  

Penske Automotive aims to boost earnings by expanding its dealership network. In Oct 2016, the company acquired six new franchises in Northern Italy that are expected to generate $200 million in annual revenues. They will also double Penske Automotive’s business in the country and make it the largest BMW, Audi and Porsche dealer in Italy. With the acquisition of Nicole Group, Penske Automotive entered the Japanese market with a strong and established local partner.

In addition, Penske Automotive expects the acquisition of Harper Truck Centres to contribute annual revenues of $130 million and complement its partnership with Freightliner and Western Star brands. This acquisition should also provide huge market potential to Penske Automotive.

In the last three months, Penske Automotive’s share price has increased 11.56% while the Zacks-categorized Non-food Retail/Wholesale industry saw a 1.31% decrease. The company benefitted from increasing dealerships, the rising sales of new vehicles and capital deployment. Record earnings in the last quarter also boosted the share price of the company.

PENSKE AUTO GRP Price

PENSKE AUTO GRP Price | PENSKE AUTO GRP Quote

Zacks Rank & Key Picks

Penske Automotive currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include Allison Transmission Holdings, Inc. ALSN, America's Car-Mart Inc. CRMT and Rush Enterprises, Inc. RUSHA.

Both Allison Transmission and America's Car-Mart sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allison Transmission has a long-term growth rate of 11%.         

America's Car-Mart has a long-term growth rate of 45.50%.

Rush Enterprises, carrying a Zacks Rank #2 (Buy), has a long-term expected growth rate of 15%.

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PENSKE AUTO GRP (PAG): Free Stock Analysis Report
 
AMERICAS CAR-MT (CRMT): Free Stock Analysis Report
 
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