Paccar Inc. set a third-quarter net income record with strong results across its global truck, parts and financing businesses. And it expects even better results next quarter.
But isn’t the business environment softening? Isn’t freight demand slowing?
“There’s a strong demand out there for trucks,” Paccar CEO Preston Feight told analysts on an earnings call Tuesday. “Vocational markets remain very good, 30% of the build. The larger companies are also ordering trucks for the year. Great trucks and an undersupplied market for the past few years bodes well for a strong future.”
Bellevue, Washington-based Paccar posted record Q3 net income of $769.4 million, or $2.21 per diluted share, 102% higher than the $380.5 million, or $1.09, earned in the same period last year. Third-quarter revenues were $7.06 billion, compared with $5.15 billion a year ago.
Earnings beat consensus
The per-share earnings beat the Zacks Consensus Estimate of $2.01. Several analysts have raised their target price for Paccar stock, seeing it well positioned to weather an economic downturn. Paccar’s board raised the per-share dividend by 9%, to 37 cents from 34 cents.
“I think with the older fleet age, we’re going to continue to see strong truck performance and parts performance for the next while,” Feight said.
The parent company of Kenworth, Peterbilt and Europe-based DAF Trucks is still experiencing some parts shortages dating to the pandemic. That requires “red-tagging” assembled but unfinished trucks at its plants and nearby until the necessary parts arrive. But Feight said that situation is improving.
Gross margin ‘best in the industry’
’The truck maker’s gross margin improved to 14.9% in the quarter on 44,400 new truck deliveries, at the low end of a 44,000 to 48,000 estimate. Deliveries should rise to 46,000 to 50,000 in Q4, which would translate to a gross margin in the 15% to 15.5% range.
“Our margins are the best in the industry,” said Harrie Schippers, Paccar president and CFO.
Paccar’s orderbooks for 2023 are open. “They’re substantially full in Q1, filling in well in the second quarter and even into the second half as customers look into their full-year delivery plans and allocate their capital for next year,” Feight said.
“We see nothing slowing us down in the year. Obviously the further it gets out the less clarity there is, but there’s a great backlog of orders, and it’s growing.”
Parts revenue stays strong
Parts revenue continued to shine as the company expanded to 18 its number of distribution centers with a new 260,000-square-foot facility in Louisville, Kentucky. Paccar Parts revenues were $1.47 billion, generating pretax income of $373.6 million, a 32% increase compared to $282.1 million earned in the third quarter of 2021.
Paccar Financial posted pretax income of $146.2 million compared to $120.1 million in Q3 2021. High prices for new and used trucks, which continued in short supply because of supply chain-related slowdowns in new equipment manufacturing, boosted those numbers.
Kenworth and Peterbilt truck resale values command a 10%-20% premium over competitors’ trucks, Schippers said.
Related articles:
What recession? Paccar posts record Q2 sales and earnings
Freezing dash leads to Paccar recall