PACCAR Inc. (PCAR) posted a 14.9% rise in earnings to 77 cents per share in the first quarter of 2014 from 67 cents in the same quarter of 2013, surpassing the Zacks Consensus Estimate of 75 cents. Net income surged 16% to $273.9 million from $236.1 million in the year-ago quarter.
Revenues in the quarter increased 11.7% to $4.38 billion, surpassing the Zacks Consensus Estimate of $4.03 billion.
The increase in earnings was attributable to the growth in truck and aftermarket parts sales along with pre-tax profits in financial services.
Segment Results
Revenues in the Truck, Parts and Other segment increased 12.5% to $4.09 billion. Pre-tax income in the segment surged 25.8% to $315.2 million from $250.6 million a year ago.
Industry sales in the above 16-ton truck market in Europe are expected to be in the range of 200,000–230,000 units in 2014, down from 241,000 units in 2013. Meanwhile, the company expects Class 8 industry retail sales of 220,000–240,000 vehicles in the U.S. and Canada in 2014, up from 212,000 in 2013 due to the ongoing replacement of the aging truck population and improving construction and automotive sectors. The company expects the demand for trucks with a capacity of more than six tons in Brazil to range between 140,000–150,000 units in 2014, compared with 149,000 units.
Revenues in the Financial Services segment (comprising a portfolio of 161,000 trucks and trailers, with total assets of $11.66 billion) increased 0.2% to $293.7 million while pre-tax income rose 6.7% to $85.5 million in the first quarter of 2014.
Financial Position
PACCAR’s cash and marketable debt securities amounted to $2.46 billion as of Mar 31, 2014, compared with $2.93 billion as of Dec 31, 2013.
The company’s cash from operations increased significantly to $285.7 million in the reported quarter from $384 million in the year-ago quarter. The company recorded capital investments of $54.6 million and research and development (R&D) expenses of $52.7 million in the quarter. The company has targeted capital investments of $300–$350 million and anticipates R&D expenses of $200–$250 million in 2014 for new products and enhancing operating efficiency.
PACCAR, carrying a Zacks Rank #2 (Buy), is the world’s third-largest manufacturer of heavy-duty trucks (with a capacity of more than 15 metric tons) after Volvo (VOLVY) and Daimler AG (DDAIF), and has substantial manufacturing exposure to light/medium trucks (with a capacity of 6–15 metric tons). Besides customer support for its products, the company also provides aftermarket parts, finance and leasing services.
Currently, Harley-Davidson Inc. (HOG) that carries the same Zacks Rank as PACCAR is performing well in the auto industry.
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