On Jan 15, 2014, we affirmed our Neutral recommendation on
). Though the company enjoys a strong market share and expects
boost in sales due to the ongoing replacement of the aging truck
population, it faces high competition in the commercial trucks
market and suffers from weak industry sales.
Why the Reiteration?
PACCAR posted a 31.8% rise in earnings to 87 cents per share
in the third quarter of 2013, from 66 cents in the same quarter
of 2012, surpassing the Zacks Consensus Estimate of 85 cents. Net
income surged 32% to $309.4 million from $233.6 million in the
PACCAR expects Class 8 industry retail sales of
205,000-215,000 vehicles in the U.S. and Canada in 2013. Industry
retail sales in the above 16-ton truck market in Europe are
expected to be in the range of 215,000-225,000 units in 2013.
PACCAR is well positioned in the key non-U.S. markets through
its investments in growth strategies. The company is optimistic
about its expansion plans in South America and Russia. The new
DAF factory in Ponta Grossa, Brazil and the establishment of a
subsidiary named DAF Trucks in Russia are expected to boost
However, PACCAR posted lower earnings in the first nine months
of 2013 due to lower revenues generated from its truck sales.
Unit sales of trucks declined during the period owing to lower
industry retail sales in the U.S., Canada and South America,
partially offset by higher industry retail sales in Europe.
Moreover, PACCAR's commercial truck markets face tough
competition. Profits in the Financial Services segment are also
exposed to lower margin and truck repossessions.
PACCAR is the third-largest manufacturer of heavy-duty trucks
(with a capacity of more than 15 metric tons) in the world after
). The company also provides customer support for its products by
supplying aftermarket parts as well as finance and leasing
services. PACCAR has a long-term agreement with
) to provide a continued supply of engines.
Other Stocks to Consider
PACCAR currently carries a Zacks Rank #2 (Hold). Another stock
worth considering in the automobile sector is
), which carries the same Zacks Rank.
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PACCAR INC (PCAR): Free Stock Analysis Report
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