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Is PACCAR (PCAR) Poised for an Earnings Beat in Q3?

PACCAR Inc.PCAR is set to report third-quarter 2015 results on Oct 27. In the last quarter, the company had delivered a positive earnings surprise of 8.62%. Let's see how things are shaping up for this announcement.

Why a Likely Positive Surprise?

Our proven model shows that PACCAR is likely to beat earnings estimates this season because it has the right combination of the two key ingredients.

Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at +0.86%. A favorable Zacks ESP serves as a meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: PACCAR currently carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating earnings. Conversely, we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

PACCAR's Zacks Rank #3 and positive ESP make us reasonably confident of a positive earnings beat.

What's Driving the Better-than-Expected Earnings?

PACCAR's net income for 2014 was the second-highest annual profit recorded in its history. Moreover, the company's net income, earnings per share and revenues improved significantly in the first half of 2015. We expect this trend to continue in the third quarter as well, backed by increasing truck sales.

During its second-quarter earnings release, PACCAR raised the lower end of its guidance range for Class 8 industry retail sales in the U.S. and Canada to 270,000-290,000 units from 260,000-290,000 vehicles projected earlier. The guidance for industry sales in the above 16-ton truck market in Europe was also raised to 240,000-260,000 units for 2015 from the previous projection of 220,000-250,000 units. Higher industry sales should translate into higher sales for the company as well.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Magna International Inc. MGA has an Earnings ESP of +1.82% and a Zacks Rank #3. The company is expected to report third-quarter 2015 results on Nov 3.

American Axle & Manufacturing Holdings Inc. AXL has an Earnings ESP of +1.49% and a Zacks Rank #3. The company is expected to release third-quarter 2015 earnings results on Oct 30.

Allison Transmission Holdings, Inc. ALSN has an Earnings ESP of +4.55% and a Zacks Rank #3. The company is expected to release third-quarter 2015 earnings results on Oct 23.

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PACCAR INC (PCAR): Free Stock Analysis Report

AMER AXLE & MFG (AXL): Free Stock Analysis Report

MAGNA INTL CL A (MGA): Free Stock Analysis Report

ALLISON TRANSMN (ALSN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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