BELLEVUE, Wash. — PACCAR (NASDAQ: PCAR) reported excellent revenues and net income for the third quarter of 2019,” said Preston Feight, chief executive officer. “PACCAR’s third-quarter results reflect strong global truck production and excellent global aftermarket parts results. I am very proud of our employees who have delivered industry-leading trucks, powertrains and transportation solutions to our customers.”
PACCAR achieved net income of $607.9 million ($1.75 per diluted share) in the third quarter of this year, 11 percent higher than the net income of $545.3 million ($1.55 per diluted share) earned in the same period last year. Third-quarter net sales and financial services revenues were $6.37 billion, 11 percent higher than the $5.76 billion reported in the third quarter of 2018.
Net sales and financial services revenues for the first nine months of 2019 were $19.48 billion compared to $17.22 billion last year. PACCAR earned $1.86 billion ($5.34 per diluted share) for the first nine months of 2019 compared to $1.62 billion ($4.59 per diluted share) in the same period last year. PACCAR achieved an excellent 9.5 percent after-tax return on revenues in the third quarter and the first nine months of 2019.
Feight added, “PACCAR achieved a strong 14.9 percent Truck, Parts, and Other gross margin in the third quarter and year-to-date, benefiting from good pricing, production efficiency and rigorous cost controls. We anticipate that 2020 will be another good year with a normal replacement truck market and strong demand for PACCAR’s premium products.”
PACCAR Repurchases Common Shares
PACCAR repurchased 832,800 common shares for $53.6 million in the third quarter. Stock repurchases of $430.5 million remain under the current $500 million program authorized by the PACCAR board of directors. “The stock repurchase program reflects PACCAR’s ongoing excellent business performance and the board’s confidence in PACCAR’s future opportunities,” said Mark Pigott, PACCAR executive chairman.
Financial Highlights – Third Quarter 2019
Highlights of PACCAR’s financial results for the third quarter of 2019 include:
- Consolidated sales and revenues of $6.37 billion.
- Net income of $607.9 million, an after-tax return on revenues of 9.5 percent.
- PACCAR Parts pre-tax income of $207.4 million.
- Financial Services pre-tax income of $66.5 million.
- Manufacturing cash and marketable securities of $4.64 billion.
- Cash generated from operations of $727.1 million.
- Record stockholders’ equity of $9.96 billion.
Financial Highlights – Nine Months 2019
Highlights of PACCAR’s financial results for the first nine months of 2019 include:
- Record consolidated sales and revenues of $19.48 billion.
- Record net income of $1.86 billion.
- PACCAR Parts pre-tax income of $625.6 million.
- Financial Services pre-tax income of $230.8 million.
- Cash generated from operations of $1.92 billion.
- Medium-term note issuances of $2.04 billion.
Global Truck Markets
Class 8 truck industry retail sales for the U.S. and Canada are expected to be in a range of 310,000-320,000 vehicles in 2019, the second-highest market in history. “Class 8 truck industry retail sales in 2020 for the U.S. and Canada are estimated to be in a range of 230,000-260,000 vehicles, a solid replacement vehicle market. Good U.S. economic growth, 50-year-low unemployment, and strong consumer spending are generating freight tonnage growth of 4.2 percent this year,” said Gary Moore, PACCAR executive vice president. “The superior operating performance of Peterbilt and Kenworth trucks enhances our customers’ profitability.”
“Customers recognize DAF’s product quality leadership, industry-leading fuel efficiency, low operating costs and excellent resale value,” said Harry Wolters, DAF president. “DAF’s above 16-tonne market share was a strong 16.4 percent through the first three quarters of this year.” It is estimated that the European truck industry registrations in the above 16-tonne segment will be in the range of 310,000-320,000 units this year, one of the best markets in history. The 2020 truck market is expected to be in the range of 260,000-290,000 trucks.
The South American above 16-tonne truck market is projected to be in a range of 95,000-105,000 vehicles this year, and in a range of 100,000-110,000 trucks in 2020. “Customer demand for DAF and Kenworth trucks has resulted in a 79 percent increase in deliveries in South America this year,” said Marco Davila, PACCAR vice president.
The Brazilian portion of the above 16-ton truck market is projected to be in the range of 65,000-75,000 vehicles in 2019, and a range of 70,000-80,000 trucks in 2020.
PACCAR Parts Achieves Excellent Profits and Opens New TRP Stores
PACCAR Parts achieved an outstanding pre-tax profit of $207.4 million in the third quarter of 2019, 10 percent higher than the $188.5 million earned in the third quarter of 2018. Third-quarter 2019 revenues were $1.00 billion, 4 percent higher than the $960.1 million achieved in the third quarter last year.
PACCAR Parts achieved a pre-tax profit of $625.6 million in the first nine months of 2019, compared to $574.8 million in the first nine months of 2018. PACCAR Parts’ nine-month revenues were $3.03 billion, compared to $2.87 billion for the same period last year.
David Danforth, PACCAR vice president and PACCAR Parts general manager, noted, “PACCAR Parts’ outstanding financial results have been driven by investments in new parts distribution centers (PDCs), innovative programs such as national fleet services, e-commerce and a growing population of PACCAR MX engines. PACCAR Parts’ new 250,000 square-foot PDC in Las Vegas, Nevada, and 160,000 square-foot PDC in Ponta Grossa, Brazil, will open in 2020.”
DAF, Kenworth, and Peterbilt dealers have opened nearly 200 TRP retail stores, which provide high-quality aftermarket products and services to owners of all makes of light-, medium- and heavy-duty trucks, trailers, buses and engines. TRP stores are located close to customers in order to provide fast delivery, comprehensive parts selection and technical expertise for all brands of trucks.
Fifty percent of the customers at TRP stores are new to PACCAR. The first TRP store opened in 2013, and there are now retail stores in Europe, North America, South America, Australia, Asia and Africa. “TRP stores increase the aftermarket parts opportunity available to PACCAR and its dealers,” commented Darrin Siver, PACCAR senior vice president.
Capital Investment and Research and Development
PACCAR’s excellent long-term profits, strong balance sheet and intense focus on quality have enabled the company to invest $6.6 billion in new and expanded facilities, innovative products and new technologies during the past decade.
Capital investments are estimated to be $675-$725 million and R&D expenses are expected to be $325-$335 million in 2019. PACCAR estimates that it will invest $625-$675 million in capital projects and $320-$350 million in R&D expenses in 2020.
“The company is investing in aerodynamic truck models, integrated powertrains including diesel, electric, hybrid, and hydrogen fuel cell technologies, as well as advanced driver assistance systems, digital services and next-generation manufacturing capabilities,” said Harrie Schippers, PACCAR president and CFO.
The DAF CF Electric truck was honored as the “Green Truck Logistics Solution” for 2019 at the Transport Logistic trade fair in Munich, Germany by the leading German trade magazines Verkehrs Rundschau and Trucker. The prestigious award recognizes the deployment of advanced technologies for innovative, sustainable logistics. The Port of Duisburg in Germany is testing DAF CF Electric trucks in its operations.
PACCAR Earns Diversity Award
Kenworth, Peterbilt and PACCAR Parts were each honored by the Women In Trucking Association (WIT) as a “Top Company to Work for.” The recognition was for having a culture that fosters gender diversity as well as providing employees with an excellent work environment. WIT is a nonprofit organization that encourages employment and promotes the accomplishments of women in the trucking industry.
Financial Services Companies Achieve Good Results
PACCAR Financial Services (PFS) offers competitive retail financing to Peterbilt, Kenworth and DAF dealers and customers. PFS has a portfolio of 205,000 trucks and trailers, with record total assets of $15.61 billion. PacLease, a major full-service truck leasing company in North America and Europe, with a fleet of 39,000 vehicles, is included in this segment.
PFS achieved good profits during the third quarter and the first nine months of 2019. PFS earned $66.5 million in the third quarter this year compared to $78.8 million earned in the same period last year. Third-quarter 2019 revenues were $362.8 million compared to $339.9 million in the same quarter of 2018.
For the nine-month period, PFS pre-tax income was $230.8 million in 2019 compared to $218.7 million last year. Nine-month revenues were $1.07 billion in 2019 compared with $1.01 billion for the same period a year ago.
“PFS’ high-quality portfolio delivers excellent profits to PACCAR and benefits dealers in new and used truck transactions,” said Todd Hubbard, PACCAR vice president. “Kenworth and Peterbilt truck resale values command a 10-15 percent premium over competitors’ trucks.”
“PFS provides leading-edge technology solutions, excellent customer service and dedicated support to the transportation industry. Kenworth, Peterbilt and DAF dealers and customers appreciate the ease of doing business with PFS,” said Craig Gryniewicz, PACCAR Financial Corp. president. PACCAR’s strong balance sheet, complemented by its A+/A1 credit ratings, enables PFS to have excellent access to the commercial paper and medium-term note markets. PFS profitably supports the sale of PACCAR trucks in 25 countries on four continents.
PACCAR is a global technology leader in the design, manufacture and customer support of high-quality light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. PACCAR also designs and manufactures advanced diesel engines, provides financial services and information technology, and distributes truck parts related to its principal business.
PACCAR will hold a conference call with securities analysts to discuss third-quarter earnings on October 22, 2019, at 9:00 a.m. Pacific time. Interested parties may listen to the call by selecting “Q3 Earnings Webcast” at PACCAR’s homepage. The webcast will be available on a recorded basis through October 29, 2019. PACCAR shares are listed on the NASDAQ Global Select Market, symbol PCAR. www.paccar.com