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Key Factors Aiding PACCAR's (PCAR) Fate This Earnings Season

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PACCAR Inc. (PCAR - Free Report) is slated to release second-quarter 2021 results on Jul 27, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings and revenues is pegged at $1.38 and $5.44 billion, respectively.

The trucking giant delivered better-than-expected earnings in the last reported quarter amid higher-than-anticipated sales in the Parts segment.

Over the trailing four quarters, PACCAR beat earnings estimates on three occasions and missed in the other, the average surprise being 13.8%. This is depicted in the graph below:

PACCAR Inc. Price and EPS Surprise

PACCAR Inc. Price and EPS Surprise

PACCAR Inc. price-eps-surprise | PACCAR Inc. Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for second-quarter 2021 earnings per share has moved south by 5 cents over the past 90 days. However, the bottom-line projection calls for a 220.9% year-over-year surge. The Zacks Consensus Estimate for revenues also suggests a 101.4% increase from the prior-year reported figure of $2.7 billion.

Factors at Play

Demand for Class 8 heavy trucks is likely to have gained strength amid accelerated vaccination drive, improving credit conditions and rising fiscal stimulus. PACCAR’s strong reputation for quality and leading brands — Kenworth, Peterbilt and DAF — is anticipated to have aided the company’s second-quarter performance. Investors should note that the consensus mark for revenues from the Trucks segment is pegged at $4,299 million, indicating a whopping 131.4% increase from the prior-year quarter level. Encouragingly, the consensus estimate for the segment’s pretax profit is $286 million, suggesting a reversal of the $46.2 million loss seen in the prior-year quarter.

Persistent growth in aftermarket parts — which are less cyclic in nature and carry high margins — is likely to have supported the firm’s quarterly performance. The Zacks Consensus Estimate for revenues from the Parts segment is pegged at $1,167 million, indicating an increase from the $824 million recorded in the corresponding year-ago period. The consensus mark for pretax profit is pinned at $250 million, suggesting growth the year-ago figure of $152 million.

While the above factors are anticipated to have boosted PACCAR’s to-be-reported quarter’s performance, the ongoing global chip crunch might have dented quarterly sales and earnings to some extent.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for PACCAR for the to-be-reported quarter, as it does not have the right combination of the two key ingredients. A combination of a positive Earnings ESP, and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: PACCAR has an Earnings ESP of -0.03%.

Zacks Rank: It currently carries a Zacks Rank of 3.

Stocks to Consider

Here are a few companies in the auto space that you may want to consider, as our model shows that these have the right combination to post an earnings beat in the upcoming releases:

Allison Transmission (ALSN - Free Report) has an Earnings ESP of +0.08% and carries a Zacks Rank #3, currently. The company is set to announce second-quarter 2021 results on Jul 29.

Sonic Automotive (SAH - Free Report) has an Earnings ESP of +18.53% and holds a Zacks Rank of 2, at present. The company is scheduled to report quarterly numbers on Jul 29.

Tenneco (TEN - Free Report) has an Earnings ESP of +1.2% and currently carries a Zacks Rank #3. The company will release second-quarter results on Aug 5.