DDAIF Mercedes Benz Group AG (PK)

PACCAR Inc. (PCAR) posted a 26.4% fall in earnings to 67 cents per share in the first quarter of 2013 from 91 cents in the same quarter of 2012 and missed the Zacks Consensus Estimate by a penny. Net income declined 27.9% to $236.1 million from $327.3 million in the first quarter of 2012. Revenues in the quarter dipped 18.0% to $3.9 billion but surpassed the Zacks Consensus Estimate of $3.7 billion.

The fall in revenues and earnings was attributable to lower industry truck volumes in North America due to sluggish economic growth.

Segment Results

Revenues in the Truck and Other segment dipped 19.6% to $3.6 billion during the quarter. Pre-tax income ebbed 37.2% to $250.6 million from $398.8 million in the year-ago quarter.

PACCAR launched the new DAF CF Euro 6 and LF Euro 6, the Kenworth T880 and the Peterbilt Model 567 trucks in the quarter. These lineups complemented the new DAF XF Euro 6, the Kenworth T680 and the Peterbilt Model 579 trucks launched in 2012. PACCAR also expanded its range of advanced, fuel-efficient engines with the launch of the PACCAR MX-11 engine.

The company expects 2013 industry sales in the above 16-tons between 210,000 units and 235,000 units compared with the prior guidance of 210,000 units–250,000 units. However, it reiterated Class 8 industry retail sales guidance of 210,000 vehicles–240,000 vehicles for 2013.

PACCAR continues to expand its global network of 15 strategically located parts distribution centers (PDCs). The company already opened a $30 million, 280,000-square-foot PDC in Eindhoven, the Netherlands in March. Its PDC in Lancaster, PA, doubled in size with the addition of 60,000 square feet. It will open its new Brasilian PDC in Ponta Grossa in 2013, supporting the launch of DAF trucks.

Revenues in the Financial Services segment (comprises portfolio of 153,000 trucks and trailers, with total assets of $10.7 billion) increased 12.1% to $293.1 million while pretax income rose 12.3% to $80.1 million in the first quarter of 2013. The increase in pre-tax income was attributable to growth in portfolio balances and lower borrowing costs.

Financial Position

PACCAR’s cash and marketable debt securities amounted to $2.4 billion as of Mar 31, 2013, which was flat compared with the same as of Dec 31, 2012. Long-term debt remained unchanged at $150 million as of Mar 31, 2013 compared with 2012-end.

The company’s cash from operations increased significantly to $384.0 million in the quarter from $126.3 billion in the same quarter of 2012 due to a substantial fall in wholesale receivables on new trucks. Meanwhile, capital expenditures increased to $97.1 million from $70.7 million in the first quarter of 2012. The company has targeted capital investments of $400-$500 million and R&D expenses of $250-$275 million in 2013 for new products and expansion of manufacturing capacity.

Our Take

PACCAR, a Zacks Rank #3 (Hold), is the third largest manufacturer of heavy-duty trucks (with a capacity of more than 15 metric tons) in the world after Volvo (VOLVY) and Daimler (DDAIF), and has substantial manufacturing exposure to light/medium trucks (with a capacity of 6–15 metric tons). The company also provides customer support for its products with the supply of aftermarket parts, finance and leasing services.

Currently, Peugeot S.A. (PEUGY) with Zacks Rank #2 (Buy) is performing well in the industry where PACCAR operates.

 
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