PACCAR Inc. (PCAR) reported a more than two-fold increase in profit to $281.6 million or 77 cents per share in the third quarter of 2011 from $119.9 million or 33 cents per share in the same quarter of 2010. The truck maker’s profit exceeded the Zacks Consensus Estimate by 7 cents per share.
The increase in profit was attributable to higher truck deliveries, increased aftermarket sales and a growing financial services business worldwide.
Net sales and financial services revenues surged 68% to $4.26 billion from $2.54 billion in 2010 quarter. It was much higher than the Zacks Consensus Estimate of $3.93 billion. Pre-tax profit was $394.7 million compared with $176.8 million in the third quarter of 2010.
Segment Performance
Revenue in the Truck and Other segment jumped 73% to $3.99 billion. Pre-tax profit in the segment was $321.9 million versus $129.8 million in the third quarter of 2010.
The company’s DAF brand acquired a market share of 15.2% in the above 15-tonne market for the first nine months of 2011. Meanwhile, the company achieved a Class 8 retail market share of 27.7% in the U.S. and Canada during the same period as customers benefited from Kenworth and Peterbilt brand of vehicles.
Financial Services revenues rose 11% to $264.1 million from $238.3 million in the year ago quarter. Pretax profit was $61.8 million compared with $41.5 million in the third quarter of 2010. Finance margin increased to $96.5 million from $76.3 million in the third quarter of 2010 due to growth in the portfolio, higher used truck prices and lower borrowing costs.
Share Repurchase
During the quarter, PACCAR repurchased 7.38 million of its common shares worth $270.0 million. As of September 30, 2011, the company had 358.1 million worth of outstanding shares.
Financial Position
PACCAR’s cash and marketable debt securities amounted to $2.73 billion as of September 30, 2011, compared with $2.43 billion as of December 31, 2010. Long-term debt was flat at $150 million compared with the comparable period of 2010.
Cash from operations decreased to $1.15 billion for the first nine months of 2011 from $1.16 billion in the same period of 2010 despite an increase in profit. The decline in cash flow was attributable to increase in wholesale receivables on new trucks. Meanwhile, capital expenditure for the same period increased to $214.7 million from $115.8 million in the first nine months of 2010.
Our Take
PACCAR is the third largest manufacturer of heavy-duty trucks (with a capacity of more than 15 metric tons) in the world after Volvo (VOLVY) and Daimler (DDAIF). The company continues to gain market share, especially with its DAF nameplate.
Further, it expects to benefit from its fastest-growing businesses, PACCAR Parts and PACCAR Financial Services. It currently retains a Zacks #3 Rank on its stock, which implies a short-term (1–3 months) Hold rating.
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