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PACCAR (PCAR) to Report Q4 Earnings: What's in the Offing?

Zacks Equity Research

PACCAR Inc. PCAR is scheduled to report fourth-quarter and 2018 financial results on Jan 29, before the market opens. In the last reported quarter, the company delivered a positive earnings surprise of 3.3%. Per its earnings trend, PACCAR surpassed estimates in each of the trailing four quarters, the average beat being 7.6%.

Over the past year, shares of PACCAR have underperformed the industry it belongs to. The stock decreased 21.5% compared with the industry’s 18.9% decline.

Let’s see, how things shaped up for the upcoming announcement.

PACCAR Inc. Price and EPS Surprise


PACCAR Inc. Price and EPS Surprise | PACCAR Inc. Quote

Factors Influencing This Quarter

Despite witnessing a great year, the demand for heavy (Class 8) and medium-duty (Class 5-7) trucks fell in the last few months of 2018. Per ACT Research, orders for Class 8 trucks declined to roughly 43% in December compared with the same period of 2017. Further, Class 5-7 truck orders fell 4.6% compared with December 2017. The slump in orders can be partly contributed to seasonality factors along with record-breaking orders in June and July. The decline in truck orders is likely to hamper PACCAR that specializes in delivering well-known trucks. The declining truck order growth might put pressure on the company’s financials in fourth-quarter 2018.

For the soon-to-be-reported quarter, the Zacks Consensus Estimate for truck deliveries in the United States and Canada is pegged at 27,411 while for Europe the figure is 17,242. For 2018, PACCAR projects retail sales of 280,000-290,000 units for the Class 8 truck industry in the United States and Canada, and 310,000-320,000 units for Europe's more than 16-tonne market.

In the last reported quarter, this truck manufacturer struggled with mounting costs. Inaccessibility of adequate auto parts from suppliers, who were impacted by the hurricane, negatively impacted the company’s profit margin. During the quarter, part shortages pushed the company to invest materials and labors additionally. The lingering effect may also be observed in the fourth quarter.

However, the growing number of trucks and engines in the portfolio, along with consistent investment to develop technology and improve distribution capacity, places PACCAR in a strong position within the industry.

Earnings Whispers

Our proven model does not conclusively predict earnings beat for PACCAR this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here, as you will see below.

Earnings ESP: PACCAR’s Earnings ESP is -1.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.55 and $1.57, respectively.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PACCAR currently carries a Zacks Rank #3.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few stocks from the same space, with the right combination of elements to outpace earnings estimates this time around:

Oshkosh Corporation OSK has an Earnings ESP of +18.52% and a Zacks Rank of 3. The company is slated to report fourth-quarter 2018 results on Jan 30.

You can see the complete list of today’s Zacks #1 Rank stocks here.

General Motors Company GM has an Earnings ESP of +11.39% and it currently sports a Zacks Rank #1. Its fourth-quarter 2018 results are scheduled to release on Feb 6.

Wabco Holdings Inc. WBC has an Earnings ESP of +2.81% and is a #3 Ranked player. Its fourth-quarter 2018 results are slated to release on Feb 15.

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