Paccar Inc. posted first-quarter income well above a year ago even with a $446 million after-tax charge to settle civil suits from a 7-year-old price fixing case in Europe.
The Bellevue, Washington-based truck manufacturer reported net income of $733.9 million, or $1.40 per diluted share, compared with $600.5 million, or $1.15, in the January-March period of 2022. Before the charge, Paccar earned $1.18 billion, or $2.25. That beat estimates of analysts surveyed by investor site Seeking Alpha by 42 cents.
Paccar posted a whopping 19.3% gross profit margin after guiding to a still impressive 17%. It projects an 18%-19% margin in Q2.
“We saw very good operating efficiencies and cost increases were less than expected,” CEO Preston Feight told analysts on an earnings call Tuesday. “Those are the two contributors to the margin improvement over what we had guided.”
Paccar is the second of four major truck makers to report strong financial results for the quarter as other industries, particularly technology, experience a pullback. Sweden’s Volvo Group reported surprisingly strong revenue and income last week. Germany’s Daimler Truck and Traton Group will report later.
“Paccar’s results reflect ongoing strong demand for premium quality DAF, Peterbilt and Kenworth trucks, aftermarket parts and financial services worldwide,” Feight said in a news release.
Paccar’s parts business a big driver
Paccar’s parts business continued to shine with record revenue of $1.62 billion and pretax income of $438.6 million, 29% higher than the $340.2 million earned in the first quarter of 2022. A 32.2% margin on parts sales contributed to the overall margin, Paccar President and CFO Harrie Schippers said on the call.
Collaboration with its dealers has made the parts business a “high-margin, recurring revenue business,” he said. Paccar expects 10%-12% year-over-year growth in parts sales in Q2.
“We work closely with the dealers so we know what parts they need and I think the connected vehicle status is helping as well,” Feight said. “We see the powertrain business being a good contributor to the parts growth. And as we look forward to the electric vehicle world, that will also be accretive to our business in parts.”
Paccar Financial Services also helped with pretax income of $149 million. It financed one in four trucks Paccar sold during the quarter. As small and medium-size banks restrict loans, PFS can step in.
“We’re there for any customers who need it,” Schippers said.
Build slots for 2023 all but gone
Order intake remained strong, and Feight said Paccar is nearly out of build slots for the year. Preliminary discussions with fleet customers for 2024 are underway. Supply constraints that hampered the industry for more than two years still crop up.
“It’s not finished yet. We still see some constraints and we keep working through those,” Feight said. “They act as a throttle on our build right now. But [we see] generally improving circumstances and we look forward to that improving throughout the year.”
Paccar delivered 51,000 trucks during Q1 and projects 51,000-54,000 deliveries in Q2.
Paccar raised its industry forecast for full-year U.S. and Canada sales to 280,000-320,000 trucks. It forecasts the same range for the European market. Paccar said the South American market, where DAF Trucks are sold, should be in the 115,000-125,000 industry sales range for the full year.
Paccar posts record quarterly revenue
The company posted record quarterly revenues of $8.47 billion, up 30.9% from the $6.47 billion reported a year ago. That was $660 million higher than analyst estimates.
“Paccar’s long-term investments in new truck models, advanced manufacturing and a dynamic aftermarket parts business are contributing to higher operating margins,” Feight said. The company has invested $4 billion over the past five years in new heavy- and medium-duty trucks across its three brands. The changeover is complete in the U.S. and about 75% done in Europe where DAF Trucks posted a record market share of 8.6% in the quarter.
Those investments include next-generation battery electric and hydrogen powertrains, development of an autonomous vehicle platform with Aurora Innovation, and enhanced connectivity through an undisclosed strategic investment in Platform Science.
Capital investment in the quarter totaled $132.9 million, and research and development expense was $97.2 million.
The company ended the quarter with operating cash of $684.6 million and manufacturing cash and marketable securities of $5.92 billion.
Editor’s note: Updates throughout with commentary and details from earnings call.
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