Paccar Inc., which makes heavy-duty trucks, reported robust financial results for the first three months of the year, driven by record truck deliveries amid strong global demand and growing market share.
The builder of Peterbilt, Kenworth and DAF trucks posted $6.49 billion in first-quarter revenue, a 15 percent increase over the year-ago period. Net income for the quarter reached a record $629 million, up 21 percent from $521 million in the same period a year earlier.
Bellevue, Wash.-based Paccar said it delivered 51,500 vehicles worldwide in the first quarter, a 15.7 percent gain from the year-ago period. Its gross margin was 15 percent, up from 14.8 percent a year ago, according to Baird Equity Research. Analysts there attributed the boost in profits largely to the strong performance of the truck side of the business
Paccar, which has 28,000 employees, operates three main businesses: commercial truck design and manufacture, parts sales, and financing services for dealers and wholesale customers.
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Despite concern that truck manufacturers will be hit a potential slowdown in the U.S. economy and freight volumes, Paccar said it expects continued growth in sales and profits. And it touted its ability to manage costs during a potential downturn.
“We’ve proven historically that we can manage our cost structure quite efficiently, and this will be no exception,” said Chief Executive Ron Armstrong Tuesday in a call with stock analysts.
“We remain bullish on PACCAR given our favorable truck sector call and the company’s operational pedigree,” said David Leiker, an analyst at Baird Equity Research.
“It’s usually quite difficult to poke holes in this company’s performance, and Q1 was no exception,” said Alexander Potter, an analyst at Piper Jaffray & Co. The company has “a healthy backlog of new truck orders and even if a cyclical downturn materializes in 2020, which seems likely, we don’t think Paccar will be caught off-guard.”
The company raised the lower end of its estimate for industrywide retail sales of Class 8 trucks in the U.S. and Canada. Paccar now predicts sales of at least 295,000, up from the 285,000 it had estimated a few months ago. The high end of its estimate for potential industry sales remains at 315,000.
So far this year, those sales are up. Industrywide retail sales are 23 percent higher in the first quarter of 2019 in North America compared with the same period last year, the company said. In 2018, the industry sold 285,000 trucks in the U.S. and Canada, a 30 percent jump over 2017 sales, according to Paccar.
In Europe, the company still expects truck industry registrations for the above-16-ton market to be between 290,000 and 320,000 trucks.
Registrations for Paccar’s European DAF truck division rose 10 percent in the first quarter. DAF captured a record 17.1 percent of the market share in Europe, Paccar said. The company’s goal is a 20 percent share of the market.
Worldwide truck sales for the company were up 17.3 percent to $5.1 billion in the first quarter compared to the year ago period. Pretax profit for the truck sector jumped 44.5 percent to $517 million.
About 56 percent of the company’s new trucks were delivered in the United States and Canada in the first quarter. About 33 percent were delivered in Europe. The remainder went to other regions.
Sales for the parts business hit $1 billion in the first three months of the year, a 7 percent increase over the year-ago period.
First-quarter pretax profits grew 8 percent to $207.6 million compared to the year-ago period.
Paccar’s financial-services business includes its portfolio of loans for dealers and wholesale customers and a leasing company.
First-quarter revenue was up 5.2 percent to $349.5 million compared to the same period a year ago. Pretax income was 24 percent higher at $84 million, compared with the year-ago period, the company said.
Paccar Leasing has a global fleet of 38,000 vehicles. It said it will open used-truck centers in Prague and Denton, Texas, this year to continue to boost its used truck remarketing capabilities.
Paccar said it will incur capital expenditures of $625 million to $675 million this year. Spending on research and development, including advanced powertrain technologies, will range from $320 million to $340 million. The company recently opened a research facility in Silicon Valley, where it is exploring autonomous vehicle technologies, both its own and those provided by other companies.
Armstrong, who will retire as chief executive in June, repeated his belief that the company needs to be prepared for a future of alternative fuels but will be guided by the potential for return on its investments.
“As we progress over the next 12 to 24 months we will be figuring out what the best is for us for the long term,” he said. “There is still quite a bit of challenge with respect to the economic viability of some of these powertrain choices and can they survive without a high degree of subsidization. In in our minds it’s still early days.”