Commentary: Looking inside Paccar’s humble record streak
Paccar Inc. CEO Preston Feight could be forgiven for taking a victory lap celebrating the truckmaker’s 85th consecutive year of net profits.
No forgiveness needed. The company’s leader since 2019 declined to brag. That’s not the Paccar way. Humility, consistency and conservatism rule the day in Bellevue, Washington, where suit and tie is common attire even in a business culture that has come to eschew such formality.
In the company’s earnings release on Tuesday, Feight thanked the 31,100 global employees at Paccar’s three brands: DAF Truck, Kenworth and Peterbilt. He regularly calls them out for their performance. The release also pointed to 85 consecutive years of net profit and a streak of dividend payouts that stretches to 1941.
Humility on display
Several analysts on the company’s earnings call Tuesday offered Feight obligatory “great quarter” comments before seeking answers to questions they hoped would help tweak their economic models toward ending an extended streak of underestimating Paccar’s revenue and earnings performance.
Feight typically acknowledges those sentiments in the same perfunctory manner in which they’re offered. It was a little different this time.
“Well, first of all, thanks for the comment on the year,” he told Angel Castillo of Morgan Stanley. “I think our team deserves an incredible amount of credit all around the world for the wonderful performance.”
Acknowledging but deflecting praise is as close to celebrating as Feight came.
Bonkers 2023 results
Record results nearly across the board included $35.1 billion in consolidated revenue from trucks, parts and financial services, a 13.1% after-tax return, and income of $4.6 billion. Paccar delivered 109,000 Kenworth and Peterbilt trucks in North America. DAF delivered a record 63,000 trucks in Europe and other global markets.
Even the analysts who didn’t offer compliments had some influence on investors who drove Paccar shares to a near-record close of $101.01. Since a 3:2 split a year ago, Paccar shares have been on a tear, rising from $67.48 to a 52-week high of $102.20. The intraday price Wednesday was $101.30.
Analysts badly botched their estimates for Paccar’s Q4 results, The consensus by investor site Seeking Alpha predicted $2.21 per share on revenues of $8.3 billion. Paccar beat the per share number by a whopping 49 cents. A miss of a few pennies sometimes registers as notable.
Such inaccuracies can suggest poor company guidance. No one points to that with Paccar, which has beaten EPS estimates 88% of the time and revenue estimates 100% of the time over the past two years.
Winning equation: New trucks, parts sales and financing
So, how does Paccar do it?
An almost all-new product lineup at its three brands is a factor. The latest makeover, the Class 8 Peterbilt Model 589, enters production this month in Denton, Texas. It replaces the venerable long-nose Model 389 that had such a following that about 200 of them showed up at a celebration outside of the Texas Motor Speedway in May where the Model 589 debuted.
“We have refreshed our entire product lineup in the last few years,” Feight said. “We have really high-performing products that are delivering excellent results to the customers.”
Paccar trails only market leader Daimler Truck North America in sales, which rose 4% in 2023, below expected levels but better than parent Daimler Truck AG’s 1% overall unit sales gain. Sales of International-branded trucks from Traton Group subsidiary Navistar rose 9% to 75,500 in 2023. Volvo Group reports its Q4 results Friday.
Paccar Parts leverages ordering and inventory processes to speed deliveries. Its growing global footprint includes a $91.5 million investment in a 240,000-square-foot parts distribution center in Massbach, Germany. Its 20th PDC brings total dedicated space to more than 3.3 million square feet. Paccar Parts reported a 19.4% gross margin in Q4 and sees only a slight pullback in Q1.
More of the same
Feight said a 15% to 20% pullback in equipment sales in Europe where DAF Trucks operates is likely for this year. Unlike others expecting a downturn in North American truck equipment orders, Feight is upbeat.
“As far as the slowdown in orders, I’m not sure I can recognize that in our major North American markets,” he said. “We see good order intake and good visibility.” Q1 build slots are gone, and Q2 is filling up.”
As Muhammad Ali said: “It’s not bragging if you can back it up.”
Related articles:
Paccar Q4 sales, profit records overwhelm analyst estimates
Peterbilt kicks out the jams to introduce Model 589
Peterbilt reveals major redesign of flagship Class 8 Model 579
Click for more FreightWaves articles by Alan Adler.
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