PACCAR Inc. (PCAR) posted second-quarter 2014 earnings of 90 cents per share, marking an increase of 9.8% from 82 cents in the same quarter of 2013. Earnings surpassed the Zacks Consensus Estimate of 89 cents.
Net income surged 9.5% to $319.2 million from $291.6 million in the year-ago quarter. The increase in earnings was attributable to higher truck sales in the U.S. and Canada and better aftermarket parts and financial services results globally.
Revenues in the quarter rose 6% to $4.57 billion, surpassing the Zacks Consensus Estimate of $4.45 billion.
Segment Results
Revenues in the Truck, Parts and Other segment increased 6.4% to $4.3 billion. Pre-tax income in the segment surged 11.8% to $383.8 million from $343.4 million a year ago.
Industry sales in the above 16-ton truck market in Europe are expected to be in the range of 210,000–230,000 units in 2014, down from 241,000 units in 2013. Meanwhile, the company expects Class 8 industry retail sales of 230,000–250,000 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, economic growth and higher fleet capacity. The company expects the demand for heavy duty trucks in South America to range between 140,000–150,000 units in 2014.
Revenues in the Financial Services segment (comprising a portfolio of 161,000 trucks and trailers, with total assets of $11.75 billion) increased 4.8% to $302.6 million while pre-tax income rose 12.5% to $91.7 million in the second quarter of 2014.
Financial Position
PACCAR’s cash and marketable debt securities amounted to $2.46 billion as of Jun 30, 2014, compared with $2.9 billion as of Dec 31, 2013.
The company’s cash from operations decreased to $840.8 million in the first half of 2014 from $1.2 billion in the year-ago period. The company recorded capital investments of $158 million and research and development (R&D) expenses of $49.9 million in the quarter. The company has targeted capital investments of $250–$300 million in 2014. It anticipates R&D expenses of $200–$225 million in 2014 for powertrain development and the enhancement of operating efficiency of assembly facilities.
Dividend Update
During the reported quarter, PACCAR raised its quarterly dividend by 10% to 22 cents. In the last five years, the company’s regular quarterly dividend has increased more than 140%.
PACCAR currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Meritor, Inc. (MTOR), Tower International, Inc. (TOWR) and Visteon Corp. (VC), all of which sport a Zacks Rank #1 (Strong Buy).
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