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BusinessCompany earningsFinanceNewsTrucking

PACCAR sets second-quarter revenue and income records

North American order books full, with U.S. and Canada retail truck sales up 20 percent year to date

Global truck and engine maker PACCAR Inc. (NASDAQ:PCAR) set records for revenue and net income in the second quarter, but slightly missed Wall Street estimates for earnings per share.

PACCAR, whose brands include Kenworth, Peterbilt and DAF trucks, reported net income of $619.7 million or $1.78 per diluted share. That was 11 percent higher than the $559.6 million, or $1.59 per diluted share, earned in the same period last year. 

Second-quarter net sales and financial services revenues were a record $6.63 billion, compared to $5.81 billion achieved in the second quarter of 2018. The revenues topped analysts’ estimates, who predicted $6.19 billion in revenue. The after-tax return on revenue was 9.3 percent.

Kenworth, Peterbilt and DAF delivered a record 52,300 trucks in the second quarter of 2019, up 13 percent over the April-June period in 2018.

Despite second-half profit warnings from several major truck companies, PACCAR raised its industry outlook to varying degrees for North America, Europe and Brazil.

Beating estimates

PACCAR added to its streak of beating revenue estimates, which stood at 75 percent over the last two years according to investor site Seeking Alpha.com. Analysts’ estimates nailed the net income but predicted $1.81 earnings per share.

Bank of America Merrill Lynch said the profit miss was tied to a slightly lower gross margin rate than expected and weak financial services income.

“PACCAR’s financial results reflect robust global truck demand, record PACCAR truck production and record global aftermarket parts sales,” CEO Preston Feight said in a statement. “Peterbilt and Kenworth 2019 production schedules are substantially full. Customers are ordering trucks for delivery in the first half of 2020.”

On a conference call with analysts, Feight said PACCAR had 73,000 orders in queue for production in North America at the end of June, accounting for 36 percent of the industry backlog of 188,000 trucks. Building those trucks will keep plants busy for the rest of the year, he said. PACCAR has opened its order books for all products for 2020.

For the first half of 2019, PACCAR reported record net income of $1.25 billion, or $3.59 per diluted share. That was 17 percent higher than the $1.07 billion, or $3.04 per diluted share, earned in the first six months of 2018. Net sales and financial services revenues for the first six months of 2019 were a record $13.12 billion, up 14 percent from $11.46 billion in last year’s first half.

North America growth

Class 8 truck industry retail sales for the U.S. and Canada are up 20 percent year to date.

“The growing North American economies and record levels of freight tonnage have resulted in excellent demand for Kenworth and Peterbilt vehicles,” said Gary Moore, PACCAR executive vice president. 

PACCAR projects Class 8 truck industry retail sales in the U.S. and Canada to be in a range of 300,000 to 320,000 trucks in 2019.

Global markets

DAF had 16.7 percent market share in the European above 16-tonne segment in the first half of 2019. PACCAR projects European truck industry registrations of 300,000 to 320,000 vehicles this year.”

The South American above 16-tonne truck market is projected to be in a range of 100,000 to 110,000 trucks in 2019. DAF and Kenworth trucks deliveries are up 70 percent this year.  

Parts Profits

PACCAR Parts achieved record quarterly revenues of $1.03 billion in the second quarter of 2019, up 6 percent over the $968 million achieved in the same period of 2018. Second quarter 2019 pre-tax profit was a record $210.6 million, 8 percent higher than the $194.5 million achieved in the second quarter of 2018. 

PACCAR Parts’ first half 2019 revenues were $2.03 billion, compared to $1.91 billion for the same period last year. PACCAR Parts achieved pre-tax profit of $418.2 million in the first six months of 2019, compared to $386.3 million earned in the first six months of 2018.

“The growth of Kenworth, Peterbilt and DAF trucks and higher PACCAR MX engine sales have contributed to increased PACCAR Parts sales,” said David Danforth, PACCAR vice president and PACCAR Parts general manager.

Financial services results

PACCAR Financial Services (PFS) has a portfolio of 205,000 trucks and trailers, with record total assets of $15.41 billion. That includes PACCAR Leasing, which has 39,000 vehicles in North America and Europe.

Second quarter PFS pre-tax income in 2019 was $80.3 million, 11 percent higher than the $72.4 million earned in the second quarter last year. Second quarter 2019 revenues were $361.4 million, 7 percent higher than the $338 million in the same quarter of 2018.

For the first six months of 2019, PFS earned pre-tax income of $164.3 million compared to $139.9 million in 2018. First-half 2019 revenues were $710.9 million compared with $670.2 million for the same period a year ago.  

PFS provides retail financing to Kenworth, Peterbilt and DAF dealers and customers in 25 countries on four continents.  

Stock Repurchase

PACCAR repurchased 344,700 of its common shares for $23.1 million during the second quarter. That leaves $484 million for additional share repurchases under the current $500 million authorization by the Board of Directors. The board declared a regular quarterly cash dividend of 32 cents per share on July 9. First-half dividends of 64 cents per share were 21 percent higher than the 53 cents per share in the same period last year.  

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Alan Adler

Alan Adler is a Detroit-based award-winning journalist who worked for The Associated Press, the Detroit Free Press and most recently as Detroit Bureau Chief for Trucks.com. He also spent two decades in domestic and international media relations and executive communications with General Motors.

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