NASDAQ: PCAR
COMPANY DESCRIPTION
Founded
in –1905 | Current Market Cap – 20.12 Billion USD
PACCAR
Inc designs, manufactures, and distributes light, medium, and heavy-duty
commercial trucks in the United States, Europe, and internationally. It
operates in three segments: Truck, Parts, and Financial Services. The Truck
segment offers trucks that are used for the over-the-road and off-highway
hauling of commercial and consumer goods. This segment sells its trucks through
a network of independent dealers under the Kenworth, Peterbilt, and DAF
nameplates. The Parts segment distributes aftermarket parts for trucks and
related commercial vehicles. The Financial Services segment conducts full
service leasing operations under the PacLease trade name. This segment also
provides equipment financing and administrative support services for its
franchisees; retail loan and leasing services for small, medium, and large
commercial trucking companies.
RECOMMENDATION
We rate Paccar Inc. a BUY at USD 53 for
a target of USD 66 in two months.
Below are the basic reasons to
recommend this stock as a Buy.
·
Shares of PACCAR have outperformed the industry
it belongs to in the past three months. The stock has lost 2.7% against the
industry’s 13.7% decrease. In 2017, retail sales of Class 8 truck in the United
States and Canada totaled 218,000 units, up from the 2016 figure of 216,000.
·
Class 8 truck industry orders increased 111% in
first six months of 2018, on a year-over-year basis. This indicates a robust
economy and strong freight demand. The company anticipates 2018 Class 8 truck
industry retail sales for the U.S. and Canada to be within 265,000-285,000
vehicles.
·
PACCAR follows an active capital deployment
policy, including regular dividend payments. In fact, the company paid dividend
every year since 1941. In May 2018, the company raised its quarterly cash
dividend by 12% to 28 cents per share from the previous payout of 25 cents.
Subsequently, in July 2018, the company announced the same dividend payout for
the second quarter. Earlier in March 2018, it paid a quarterly dividend of 25
cents. Further, the board of directors of PACCAR approved an increase in its
share repurchase authorization by $300 million on July 2018. Prior to this, the
previous share repurchase authorization of $300 million was announced on
September 2015.
·
PACCAR is well-positioned in the key markets on
the back of R&D and capex investments and a strong cash flow. It has
investment plans for developing advanced driver assistance and truck
connectivity technologies besides expanding manufacturing facilities and parts
distribution facilities for future growth. This year, capital expenditures
worth $425-$475 million and R&D expenses of $300–$320 million are targeted
for new truck models, integrated powertrains including electric, hybrid and
hydrogen fuel cell technologies and new product technologies for advanced
driver assistance systems and truck connectivity.
·
PACCAR engages in developing and manufacturing
new products and technologies that include powertrain components and enhanced
aerodynamic truck designs. DAF, Kenworth and Peterbilt are frontrunners in the
development of battery electric, hydrogen fuel. In second-quarter 2018, these
brands together delivered a record 46,400 trucks, up 18% from that of
prior-year quarter.
·
PACCAR has quite an expanded Trailer Parts
program (TRP) based store networks on many continents, enabling it to provide
high-quality aftermarket products and services plus technical expertise to its
customers, who make light, medium and heavy-duty trucks, trailers, buses and
engines. These TRPs help PAACR expand its global distribution network and
increase brand awareness.
EARNINGS
PACCAR’s second-quarter 2018
adjusted earnings were $1.59 per share, up from $1.06 recorded in the year-ago
quarter. Earnings surpassed the Consensus Estimate of $1.43. Results were aided
by robust global truck deliveries and parts sales.
PACCAR posted quarterly
consolidated net sales and revenues of $5.81 billion. Its adjusted revenues
were $5.47 billion. The Consensus Estimate of revenues was $5.43 billion.
Revenues from the Truck, Parts and
Other segment increased to $5.47 billion in second-quarter 2018 from $4.40
billion in second-quarter 2017. The segment’s pre-tax income increased to
$632.6 million from $467.9 million recorded a year ago.
Revenues from the Financial
Services segment rose to $338 million from $306.3 million a year ago. Pre-tax
income increased to $72.4 million from $62.4 million in the year-ago quarter.
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