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PACCAR Beats on Earnings, Revs

Zacks Equity Research

PACCAR Inc. (PCAR) posted a 31.8% rise in earnings to 87 cents per share in the third quarter of 2013 from 66 cents in the same quarter of 2012, surpassing the Zacks Consensus Estimate of 85 cents. Net income surged 32% to $309.4 million from $233.6 million in the year-ago quarter.

Revenues in the quarter increased 13% to $4.3 billion, surpassing the Zacks Consensus Estimate of $4.16 billion.

The increase in earnings was attributable to the increase in truck and aftermarket parts sales along with pre-tax profits in financial services.

Segment Results

Revenues in the Truck and Other segment increased 13% to $4.0 billion. Pre-tax income in the segment surged 34% to $344.5 million from $257.2 million a year ago.

PACCAR’s DAF trucks achieved a market share of 15.9% in the above 16-ton market in Europe. DAF’s sales were benefited by the launches of DAF XF, CF and LF Euro 6 vehicles.

Industry sales in the above 16-ton truck market in Europe are expected to be in the range of 215,000–225,000 units this year, compared with the previous guidance of 210,000–230,000 units. Meanwhile, the company expects Class 8 industry retail sales of 205,000-215,000 vehicles in the U.S. and Canada in 2013.

Revenues in the Financial Services segment (comprises portfolio of 158,000 trucks and trailers, with total assets of $11.37 billion) increased 7.3% to $293.5 million while pre-tax income rose 9.7% to $88.2 million in the third quarter of 2013.

Financial Position

PACCAR’s cash and marketable debt securities amounted to $2.83 billion as of Sep 30, 2013, compared with $2.4 billion as of Dec 31, 2012. Long-term debt remained unchanged at $150 million as of Sep 30, 2013 compared with 2012-end.

The company’s cash from operations increased significantly to $1.7 billion in the first nine months of 2013 from $916.6 million in the same period of 2012. The company has targeted capital investments of $350-$400 million and R&D expenses of $225-$275 million in 2013 for new products and expansion of operating efficiency.

Our Take

PACCAR, a Zacks Rank #4 (Sell) stock, is the world’s third largest manufacturer of heavy-duty trucks (with a capacity of more than 15 metric tons) after Volvo (VOLVY) and Daimler AG (DDAIF), and has substantial manufacturing exposure to light/medium trucks (with a capacity of 6–15 metric tons). The company also provides customer support for its products with the supply of aftermarket parts, finance and leasing services.

Currently, Ford Motor Co. (F) with a Zacks Rank #2 (Buy) is performing well in the industry where PACCAR operates.

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