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Why Is Paccar (PCAR) Down 1.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Paccar (PCAR - Free Report) . Shares have lost about 1.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Paccar due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

PACCAR's Q3 Earnings & Sales Beat Estimates, Down Y/Y

PACCAR reported third-quarter 2020 net earnings per share of $1.11, surpassing the Zacks Consensus Estimate of earnings of 96 cents. This outperformance can be attributed to the rebounding global truck production and deliveries.
 
Markedly, higher-than-expected revenues from the trucks and parts segments resulted in this outperformance. Revenues from the trucks and parts segments came in at $3,504 million and $1,016 million, respectively, beating the Zacks Consensus Estimate of $3,429 million and $954 million. However, the earnings figure comes in lower than the prior-year quarter’s $1.75.

The trucking giant registered consolidated revenues (including trucks and financial services) of $4.94 billion, surpassing the Zacks Consensus Estimate of $4.24 billion. The top-line figure, however, comes in lower than the year-ago quarter’s $6.37 billion.

During the third quarter, the company recorded total pre-tax profit of $489.9 million, marking a decline from the prior-year quarter’s $777.6 million. The company’s net income fell to $385.5 million from the $607.9 million reported in third-quarter 2019.

Segmental Performance

Revenues from trucks, parts and others totaled $4,538.4 million in the July-September quarter, down from the prior-year quarter’s $6,004.2 million. The segment’s pre-tax income significantly plunged to $428 million from the $690 million recorded in the year-ago period. However, the figure beat the Zacks Consensus Estimate of $364 million.

Revenues in the financial services segment increased to $397.6 million from the year-earlier quarter’s $362.8 million. Nonetheless, pre-tax income declined to $55.5 million from the $66.5 million recorded in the year-earlier period. Meanwhile, the reported figure slightly outpaced the Zacks Consensus Estimate of $55 million.

Costs, Dividends & Cash Position

Selling, general and administrative expenses during third-quarter 2020 plunged 23.7% to $131.7 million from the $172.6 million incurred in third-quarter of 2019. Research & Development (R&D) expenses plummeted 21.3% to $64.7 million during the September-end quarter from the year-earlier quarter’s $82.2 million.

During reported quarter, PACCAR announced a regular quarterly cash dividend of 32 cents per share, payable on Dec 1, to stockholders of record as of Nov 10, 2020.

PACCAR’s cash and marketable debt securities amounted to $4,413.2 million as of Sep 30, 2020, compared with $5,169.4 million as of Dec 31, 2019.

Outlook

PACCAR has reiterated its capital expenditure and R&D expenses projection for the ongoing year. Capex is now projected at $570-$600 million, and R&D expenses are estimated in the $270-$280 million band. The company estimates that it will invest $575-$625 million in capital projects and $330-$360 million in R&D expenses next year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 10.1% due to these changes.

VGM Scores

Currently, Paccar has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Paccar has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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