PACCAR Inc. (PCAR) posted third-quarter 2014 earnings of $1.04 per share, marking an increase of 19.5% from 87 cents in the same quarter of 2013. Earnings surpassed the Zacks Consensus Estimate of 96 cents.
Net income surged 20% to $371.4 million from $309.4 million in the year-ago quarter. The increase in revenues and earnings was attributable to strong truck sales in the U.S. and Canada, and sturdy aftermarket parts and financial services results, globally.
Revenues in the quarter rose 15% to $4.93 billion, surpassing the Zacks Consensus Estimate of $4.55 billion.
Segment Results
Revenues in the Truck, Parts and Other segment increased 15.4% to $4.62 billion. Pre-tax income in the segment surged 30.6% to $449.8 million from $344.5 million a year ago.
Industry sales in the above 16-ton truck market in Europe are expected to be in the range of 210,000–220,000 units in 2014, down from 241,000 units in 2013. In 2015, the figure is expected to be in the range of 200,000–240,000 units.
Meanwhile, PACCAR expects Class 8 industry retail sales of 245,000–255,000 vehicles in the U.S. and Canada in 2014, up from 212,000 in 2013. Further, Class 8 industry retail sales in the U.S. and Canada are expected to be 240,000–270,000 vehicles in 2015.
PACCAR expects the industry demand for heavy-duty trucks in South America to range between 140,000–150,000 units in 2014 and 130,000–160,000 units in 2015.
Revenues in the Financial Services segment (comprising a portfolio of 163,000 trucks and trailers, with total assets of $11.77 billion) increased 4.2% to $305.9 million. Meanwhile, pre-tax income rose 9.9% to $96.9 million in the third quarter of 2014 on the back of higher asset balances and strong portfolio performance.
Financial Position
PACCAR’s cash and marketable debt securities amounted to $2.86 billion as of Sep 30, 2014, compared with $2.93 billion as of Dec 31, 2013.
The company’s cash from operations decreased to $1.6 billion in the first nine months of 2014 from $1.7 billion in the year-ago period.
The company recorded capital investments of $228.4 million and research and development (R&D) expenses of $153.1 million in the first nine months of 2014. The company has targeted capital investments of $225–$250 million in 2014 and $325–$375 million in 2015. It anticipates R&D expenses of $205–$215 million in 2014 for powertrain development and the enhancement of operating efficiency of assembly facilities. R&D expenses are estimated to be about $200–$250 million in 2015 as the company focuses on improving its aftermarket support, manufacturing facilities and product ranges.
Share Repurchase Update
During the reported quarter, PACCAR repurchased 0.58 million shares for $34.1 million under its $300 million share repurchase program.
Dividend Update
During the reported quarter, PACCAR announced a quarterly cash dividend of 22 cents per share. The dividend is payable on Dec 5 to shareholders of record as of Nov 14.
PACCAR currently carries a Zacks Rank #3 (Hold). Better-ranked stocks in the same industry include Toyota Motor Corp. (TM), Tata Motors Ltd. (TTM) and Gentex Corp. (GNTX), all of which sport a Zacks Rank #1 (Strong Buy).
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