Truck manufacturer Paccar forecasts strong sales going into 2018 and 2019, buoyed by economic growth driving demand higher in North America and Europe.

Their announcement in the company’s third-quarter earnings released Tuesday follows signs of a turnaround earlier this year in the truck market.

Class 8 truck sales in the U.S. and Canada are expected to be in the 210,000 to 220,000 range this year, up from its previous estimate of 200,000 to 220,000. Those figures are forecasted to increase to 220,000 to 250,000 in 2018. The company’s Peterbilt and Kenworth models gained market share in the two countries, capturing 30.1 percent of the market compared with 27.9 percent in the same period a year earlier.

Paccar raised its forecast in anticipation of “one of the best markets in history” in European truck registrations in the above 16-ton segment, now expected to hit 300,000 to 310,000 units this year, and 280,000 to -310,000 next year.

Paccar delivered 40,200 trucks in the third quarter, up two percent on the quarter. It reported third quarter profits of $402.7 million, up 16 percent from $346.2 million in the same period a year earlier. It earned net sales and financial services revenues of $5 billion in the third quarter, up nearly 18 percent from $4.25 billion in the same quarter a year earlier.

Ron Armstrong, chief executive of Bellevue, Wash., Paccar, said there are strong indicators of economic growth in the U.S. — expectations for rising GDP, more housing starts and growth in automobile sales. Demand is also promising in Europe, with transport activity reaching record levels on German highways this year.

The company has received “pretty optimistic” forecasts from customers, and sales are expected to grow in the U.S. and Canadian markets next year.

There is “lots of construction in certain parts of the country, and if an infrastructure plan gets implemented, that will bode well for the demand for vocational trucks,” Armstrong said.

“The company performed just fine, and the demand picture continues to be strengthening in the North American market and staying at a high level in Europe, both of which are pretty bullish,” said Rob Wertheimer, partner at Melius Research. However, he expects the market for used sleeper cabs at large to see headwinds. Thanks to strong sales in prior years, “The fleet will saturate because there’s very little aging out, so used values are going to be a little bit of a brake on that market.”

Paccar may see some of its share gains erode over the coming year, Michael Baudendistel, an analyst at Stifel Financial Corp., said in a report to investors.

Much of the gain has come from sales of vocational, or work trucks, Baudendistel said. But now, the market for Class 8 long-haul trucks is coming back and that will favor traditional market leaders. Both Daimler Trucks – with its latest Freightlander Cascadia – and Navistar International Corp. – with its International LT – have redesigned semi-tractors on the market going up against Paccar's older models.

“2018 may be a year that Daimler gains share due to its reputation for attractive total cost of ownership and strength in fleet trucks in addition to Navistar following its new product introductions,” Baudendistel said.

David Leiker, an analyst at Robert W. Baird, noted on an investor conference call with the company that revenues have gained 20 percent, but gross profit has fallen. That was in part due to currency exchange fluctuations, Armstrong said.

“We continue to see some of the currency impact with the British pound versus the euro and with the Mexican peso, so those are things that impact the margins. But we continue to work through those,” Armstrong said.

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Iris Kuo

Iris Kuo is a journalist, writer and cofounder of LedBetter, a data project that tracks female representation in business leadership. You can find her on Twitter: @thestatuskuo.

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