PACCAR Inc. (PCAR) posted a 20.9% fall in profits to 72 cents per share in the fourth quarter of 2012 from 91 cents in the same quarter of prior year. Nevertheless, EPS was higher than the Zacks Consensus Estimate of 68 cents. Net income dipped 22.6% to $253.5 million from $327.7 million in the fourth quarter of 2011.
The decline in profits was attributable to a 17.7% fall in consolidated revenues to $3.99 billion due to lower revenues generated from the company’s Truck, Parts and Other segment, partially offset by higher Financial Services revenues. However, total revenues exceeded the Zacks Consensus Estimate of $3.66 billion.
PACCAR performed well in full year 2012. The company’s EPS improved 9% to $3.12 from $2.86 in 2011. It outdid the Zacks Consensus Estimate of $3.09.
The company also generated the highest revenues of $17.05 billion in its history, which surpassed the Zacks Consensus Estimate of $15.96 billion. Thanks to the company’s superior products and services, geographic diversification, impressive aftermarket parts business and commendable performance of Financial Services.
Segment Results
Revenues in the Truck and Other segment dipped 19.4% to $3.70 billion during the quarter but rose 4.1% to $15.95 billion in the year. The company’s DAF nameplate trucks achieved a record market share of 16.0% in the above 16-tonne market, the highest in its 84-year history. Pre-tax income ebbed 31.5% to $271.3 million in the quarter but inched up 4.5% to $1.29 billion in the year.
Industry sales in the above 16-tonnes in Western and Central Europe were 222,000 units in 2012. The company expects industry sales in the same market between 210,000 units and 250,000 units during 2013 as customers are expected to purchase Euro 5 vehicles ahead of the introduction of the Euro 6 emission requirement in 2014.
Meanwhile, PACCAR achieved a record Class 8 retail market share of 28.9% in the U.S. and Canada as customers benefited from low operating costs of Kenworth and Peterbilt vehicles. Class 8 industry retail sales in the U.S. and Canada improved 14.2% to 225,000 units in 2012 from 197,000 in 2011. The company expects industry retail sales between 210,000 vehicles and 240,000 vehicles in 2013, driven by ongoing replacement of the aging truck population and overall economic growth.
Revenues in the Financial Services segment (comprises portfolio of 154,000 trucks and trailers, with total assets of $10.80 billion) increased 11.9% to $297.8 million while pretax income rose 16.8% to $78.7 million in the fourth quarter of 2012. For the full year, Financial Services revenues increased 6.8% to $1.10 billion while pretax income rose 30.2% to $307.8 million. The company’s believes investors have strong demand for PACCAR’s debt securities.
Share Repurchase
During the year under study, PACCAR repurchased 4.19 million shares for $162.1 million. Under the current Board-approved authorization of $300 million of stock repurchases, the company has repurchased 4.99 million shares for $192.0 million.
Dividends
PACCAR announced cash dividends of $1.58 per share to its shareholders for 2012, including a fourth quarter special dividend of 80 cents per share. Total dividend declared during the year increased 22% from 2011.
Financial Position
PACCAR’s cash and marketable debt securities amounted to $2.40 billion as of December 31, 2012, down from $2.90 billion as of December 31, 2011. Long-term debt remained unchanged at $150 million as of December 31, 2012 compared with the year-ago level.
Cash from operations decreased to $1.52 billion in 2011 from $1.59 billion in 2011. Capital expenditures of $511.0 million and research and development expenses of $279.3 million were made in global expansion strategies during the year.
The company expects capital additions of $400–$500 million and research and development expenses of $225–$275 million in 2013 as Kenworth, Peterbilt and DAF design new products and services.
Our Take
PACCAR, a Zacks Rank #4 (Sell), 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), and has substantial manufacturing exposure to light/medium trucks (with a capacity of 6–15 metric tons). The company also provides customer support for its products with the supply of aftermarket parts, finance and leasing services.
Currently, Tesla Motors (TSLA) with Zacks Rank #2 (Buy) is performing well in the industry where PACCAR operates.
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