On Oct 14, 2014, we issued an updated research report on PACCAR Inc. (PCAR). This Zacks Rank #3 (Hold) stock reported positive earnings surprises in three of the last four reported quarters.
PACCAR 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 improvement was led by higher truck sales in the U.S. and Canada, along with better global results for aftermarket parts and financial services. Revenues rose 6% to $4.57 billion, surpassing the Zacks Consensus Estimate of $4.45 billion.
PACCAR has a strong market share in the U.S. and Canada. The company’s truck deliveries are expected to increase 5% sequentially in the third quarter. Class 8 industry retail sales are also expected to increase to 230,000–250,000 vehicles in the U.S. and Canada in 2014 from 212,000 in 2013 due to the ongoing replacement of the aging truck population, economic growth and higher fleet capacity.
Moreover, PACCAR expects the demand for heavy-duty trucks in South America to range between 140,000–150,000 units in 2014, up from 149,000 units in 2013. Further, it is expanding in key non-U.S. markets and deploying capital regularly to boost earnings.
However, PACCAR faces intense competition in the commercial trucks market and the Financial Services segment. The Zacks Consensus Estimate for the company’s third quarter earnings stands at 96 cents, up 10.6% year over year.
Key Picks from the Sector
Other auto stocks worth considering include Toyota Motor Corp. (TM), Tata Motors Limited (TTM) and Advance Auto Parts Inc. (AAP). Both Toyota and Tata Motors have a Zacks Rank #1 (Strong Buy), while Advance Auto Parts sports a Zacks Rank #2 (Buy).
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