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PACCAR Beats but Earnings Fall

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PACCAR Inc. (PCAR - Free Report) reported a profit of $291.6 million or 82 cents per share in the second quarter of the year, beating the Zacks Consensus Estimate by 7 cents. However, earnings declined from $297.2 million or 83 cents per share in the second quarter of 2012.

The marginal decline in earnings can be attributable to a 3.6% fall in Truck, Parts and Other and Financial revenues in the quarter to $4.3 billion. Nevertheless, revenues were higher than the Zacks Consensus Estimate of $4.0 billion. Pre-tax income fell 3.0% to $432.9 million from $446.3 million a year ago.

Segment Results

Revenues in the Truck and Other segment dipped 4.3% to $4.0 billion. Pre-tax income in the segment decreased 4.8% to $343.4 million from $360.7 million a year ago.

The company’s DAF trucks achieved a market share of 15.8% in the above 16-ton market in Europe. DAF’s sales were benefited by the launches of the new 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 210,000–230,000 units this year. Meanwhile, the company expects Class 8 industry retail sales of 210,000-230,000 vehicles in 2013.

Revenues from PACCAR Financial Services (PFS) rose 8.5% to $288.8 million. Pretax profit improved 5.3% to $81.5 million from $77.4 million in the second quarter of 2012 led by growth in portfolio balances. Currently, PFS has a portfolio of 155,000 trucks and trailers, with total assets of $10.93 billion.

Financial Position
PACCAR’s cash and marketable debt securities was $2.52 billion as of June 30, 2013 compared with $2.40 billion as of December 31, 2012. Long-term remained unchanged at $150 million as of June 30, 2013 considering the same as of December 31, 2012.
In the first half of the year, cash flow from operations more than doubled to $1.15 billion from $444.0 million a year ago due to favorable changes in trade receivables, inventory and payables as well as a decrease in wholesale receivables on new trucks.

Meanwhile, capital expenditures rose 29.2% to $269.7 million from $208.7 million in the first half of 2012 due to new product developments and increase manufacturing efficiency. The company has targeted capital investments of $425-$475 million and R&D expenses of $250-$275 million in 2013 for developing new products and increase manufacturing capacity.

Our Take

PCAR, a Zacks Rank #4 (Sell), is the third largest manufacturer of heavy-duty trucks (with a capacity of more than 15 metric tons) in the world after Volvo and Daimler (DDAIF - Free Report) , 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, Tesla Motors (TSLA - Free Report) with a Zacks Rank #1 (Strong Buy) is performing well in the automotive industry.

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