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PACCAR (PCAR) to Report Q3 Earnings: Is a Beat in Store?

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PACCAR Inc. PCAR is scheduled to report third-quarter 2018 financial results on Oct 23, before the market opens.

In the last reported quarter, the company delivered a positive earnings surprise of 0.62%. Per its earnings trend, PACCAR surpassed estimates in each of the trailing four quarters, with an average beat of 8%.

The company’s long-term EPS growth for the next 3-5 years is pegged at 10.8%.

Also, shares of PACCAR have outperformed the industry it belongs to in the past three months. The stock has decreased 2.7% compared with the industry’s 13.7% decline.

PACCAR Inc. Price and EPS Surprise

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

Is Positive Surprise Likely?

According to our quantitative model, chances of PACCAR beating the Zacks Consensus Estimate in the third quarter are high. This is because, it has the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or better — which is required to increase the odds of an earnings beat.

Earnings ESP: PACCAR has an Earnings ESP of +1.21%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.52 and $1.50, 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. This, when combined with a positive ESP, makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

What’s Driving Better-Than-Expected Earnings?

In the second quarter of 2018, the company witnessed increased Class 8 truck orders compared with the prior-year quarter. This uptrend can be attributed to a robust economy and solid freight demand. This momentum is likely to continue in the soon-to-be-released quarter.

PACCAR anticipates 2018 Class 8 truck industry retail sales for the U.S. and Canada to be within 265,000-285,000 vehicles. The estimated range is much higher than 218,000 units of retail sales generated in 2017. For the third-quarter 2018, the Zacks Consensus Estimate for truck deliveries in the United States and Canada is 27,522. In second-quarter 2017, the company delivered 25,900 trucks in the United States and Canada.

Furthermore, a strong balance sheet and outstanding long-term earnings are enabling PACCAR to invest in innovative products and new technologies. In 2018, the company aims to invest $300-$320 million under research and development expenses to develop new truck models and powertrains enabled with electric, hybrid and hydrogen fuel-cell technologies.

Stocks to Consider

Here are a few auto stocks worth considering, comprising the right combination of elements to deliver an earnings beat this time around:

Cummins Inc. (CMI - Free Report) has an Earnings ESP of +1.46% and a Zacks Rank of 3. The company will report third-quarter 2018 financial figures on Oct 30.

Fox Factory Holding Corp. (FOXF - Free Report) has an Earnings ESP of +2.77% and a Zacks Rank #3. The company’s third-quarter 2018 financial results are expected to be released on Nov 7.

Tesla, Inc. (TSLA - Free Report) has an Earnings ESP of +5.88% and is a Zacks #3 Ranked player. The company’s third-quarter 2018 financial numbers are expected to be announced on Nov 7.

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