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PACCAR (PCAR) Beats on Q1 Earnings, Revenues; Falls Y/Y

PACCAR Inc.’s PCAR first-quarter 2016 adjusted earnings decreased 6.6% to 99 cents per share from $1.06 recorded in the year-ago quarter. Earnings, however, topped the Zacks Consensus Estimate of 95 cents.

Adjusted earnings exclude a $942.6 million non-recurring charge for the European Commission investigation of all European truck manufacturers. Including this, net loss came in at $594.6 million or $1.69 per share, while in the year-ago quarter, the company had recorded net income of $378.4 million or $1.06 per share.

Revenues declined 11% year over year to $4.30 billion but exceeded the Zacks Consensus Estimate of $4.07 billion.

Results benefited from a strong North American truck market and record DAF market share in Europe, along with higher margins from truck and parts segment and strong results from the Financial Services sector.

Segment Results

Revenues from the Truck, Parts and Other segment decreased 11.8% year over year to $4.01 billion in the first quarter of 2016. The company reported pretax loss of $515.6 million against pretax income of $467.6 million a year ago.

PACCAR reaffirmed the estimate for 2016 industry sales in the above 16-ton truck market in Europe at 260,000–290,000 units. However, the estimate for Class 8 industry retail sales for the U.S. and Canada was lowered to 220,000–250,000 units from the prior estimate of 230,000–260,000 vehicles.

Revenues in the Financial Services segment (comprising a portfolio of 175,000 trucks and trailers, with total assets of $12.3 billion) improved 1.7% to $289.4 million. Pre-tax income in the segment declined to $80.3 million from $89 million in the year-ago quarter.

Financial Position

PACCAR’s cash and marketable debt securities amounted to $3.23 billion as of Mar 31, 2016 compared with $3.38 billion as of Dec 31, 2015.

The company generated $795.8 million in cash from operating activities during the first quarter of 2016 compared with $476.2 million in the prior-year period.

For the full year, the company targets capital investments of $325–$375 million for enhanced aftermarket support, manufacturing facilities and new product development. Research and development expenses are estimated at $240–$260 million for 2016.

Capital Deployment

In the first quarter of 2016, PACCAR repurchased 1.1 million shares for $56.3 million. Under the current share repurchase authorization worth $300 million, the company has repurchased 3.8 million shares for $192.6 million.

Zacks Rank

PACCAR currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include The Goodyear Tire & Rubber Company GT, Superior Industries International, Inc. SUP and Lear Corp. LEA. Each of these stocks carries a Zacks Rank #1 (Strong Buy).

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