The maker of Peterbilt and Kenworth trucks falls short of projections despite healthy revenue growth

Photo: Kenworth

Photo: Kenworth


Paccar’s (NASDAQ: PCCR) shares tumbled Tuesday as revenues at the manufacturer of Peterbilt, Kenworth and DAF trucks didn’t meet Wall Street expectations, though the OEM’s overall performance was very strong.

According to SeekingAlpha, quarterly revenue for the builder of Peterbilt and Kenworth and DAF trucks fell short by $90 million. Revenues were $5.42 billion, which was up 14.6% year-on-year.

That miss of about 1.6% reported in PACCAR’s quarterly earnings was enough to send the company’s stock on a downward slide at a rate greater than the overall market decline. At approximately 3 p.m., Paccar’s stock was trading at $56.89 per share, down $3.61 for a loss of just under 6%. It traded as low as $55.13 earlier in the day. The stock was $72.41 as recently as September 20.

The company’s earnings per share of $1.55 were ahead of a consensus number of $1.51. But according to Bank of America Merrill Lynch, that “beat is largely driven by a one-time benefit on the tax line, resulting in a 10 cts delta vs. our forecasts.” The Merrill Lynch forecast was for EPS of $1.51.

“Truck margins were the big disappointment,” Merrill Lynch said in its morning report. It noted that sales were up 15% year-on-year, but pretax profit was up only 13% and pre-tax margin was down 10 bps.

“PACCAR  has a strong franchise but we are concerned about the operating leverage (or lack thereof) at the peak of the cycle and we have (a) cautious view of the global truck market,” Merrill Lynch said in reiterating a “neutral” rating on the stock.

The company’s quarterly statement cited the margin narrowing on the normal shutdowns of its DAF Dutch subsidiary and “supplier parts shortages in North America.”

According to Merrill, there were other shortfalls in the report. The quarter’s gross margin was 14.1%, and its forecast was 14.9%. The incremental margin of 10.8% was less than the margins near 15% the prior two quarter.

All of this is happening while sales are strong. PACCAR said its forecast for 2018 retail truck sales is at 280,000-290,000, which is up 4% from an earlier forecast and a whopping 28-33% growth year-on-year.

“Customer demand for Kenworth, Peterbilt and DAF trucks is at record levels,” CEO Ron Armstrong said in the earning release. “Kenworth and Peterbilt have received more than double the number of U.S. and Canada Class 8 orders in the first nine months of this year, compared to the same period last year. PACCAR truck backlogs are very strong, with Kenworth and Peterbilt production scheduled well into next year.”

There was no “contagion” in other stocks. For example, at approximately 3 p.m., Navistar (NYSE: NAV) was down less than 2%.