On Jun 26, we maintained our Neutral recommendation on PACCAR Inc. (PCAR) despite its robust market share and positive impact from the ongoing replacement of the aging truck population, as we are disappointed with its lackluster results for the first quarter of 2013.
On Apr 23, PACCAR posted a 26.4% fall in earnings to 67 cents per share in the first quarter of 2013 from 91 cents in the same quarter of 2012 and missed the Zacks Consensus Estimate by a penny. Net income declined 27.9% to $236.1 million from $327.3 million in the first quarter of 2012.
Revenues in the quarter dipped 18.0% to $3.9 billion but surpassed the Zacks Consensus Estimate of $3.7 billion. The fall in revenues and earnings was attributable to lower industry truck volumes in North America due to sluggish economic growth.
Following the release of first quarter results, the Zacks Consensus Estimate for 2012 went down 0.6% to $3.14 per share. The Zacks Consensus Estimate for 2013 also dipped by a penny to $3.61 in the same timeframe.
PACCAR’s commercial truck markets face tough competition. Further, profits in the Financial Services segment are exposed to lower margin and truck repossessions.
However, PCAR achieved a record Class 8 retail market share of 29% in the U.S. and Canada as customers benefited from low operating costs of Kenworth and Peterbilt vehicles. Class 8 industry retail sales in the U.S. and Canada improved 14.2% to 225,000 units in 2012.
The company expects industry retail sales between 210,000 vehicles and 240,000 vehicles in 2013, driven by ongoing replacement of the aging truck population and overall economic growth. The company is also well positioned in the key non-U.S. market through its investments in growth strategies.
PACCAR is the third largest manufacturer of heavy-duty trucks (with a capacity of more than 15 metric tons) in the world after Volvo (VOLVY) and Daimler (DDAIY), and has substantial manufacturing exposure to light/medium trucks (with a capacity of 6–15 metric tons).
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