PACCAR Inc. (PCAR) reported an almost threefold increase in profit to $193.3 million or 53 cents per share in the first quarter of 2011 from $68.3 million or 19 cents per share in the same quarter of 2010. With this, the company has beaten the Zacks Consensus Estimate by 4 cents per share.

Net sales and Financial Services revenues surged 47% to $3.28 billion, which was higher than the Zacks Consensus Estimate of $2.94 billion. The rise in sales and profit was attributable to strong truck sales in Europe and North America and an improvement in financial services profit and parts revenues globally.

Segment Performance

Revenues in the Truck and Other segment soared 53% to $3.04 billion. The company’s European brand, DAF, acquired 16% of market in early 2011 in the above 15-tonne market. Industry retail sales in the above 15-tonne truck market in Europe are estimated to reach 220,000-240,000 units in 2011. The industry retail sales of Class 8 trucks in the U.S. and Canada are forecasted to reach 200,000 units–220,000 units in the year.

Revenues in the Financial Services segment dipped 2% to $241 million from $246.4 million in the same quarter of 2010. Pretax income increased to $50.3 million from $28.1 million in the first quarter of 2010 due to better finance margins and an improved provision for credit losses. The provision for credit losses was $10.5 million versus $18.4 million in the same period in 2010.

Financial Position

PACCAR’s cash and marketable debt securities amounted to $2.64 billion as of March 31, 2011, up from $2.43 billion as of December 31, 2010. Long-term debt increased to $6.24 billion from $6.09 billion as of December 31, 2010. The company’s debt-to-capital ratio deteriorated to 9% as of March 31, 2011 from 2.7% in the year-ago period.

Cash from operations rose to $459.3 billion in the quarter from $285.4 billion in the same quarter of 2010 due to higher income. Meanwhile, capital expenditures increased to $62.2 million from $26.1 million in the first quarter of 2010. For 2011, capital expenditures are projected to be $400 million–$500 million and research and development expenses are estimated at $275 million–$300 million.

Our Take

PACCAR, a Zacks #3 Rank (Hold) stock, is the third largest manufacturer of heavy-duty trucks (with a capacity of more than 15 metric tons) in the world after Volvo and Daimler (DDAIF), and has substantial manufacturing exposure to light/medium trucks (with a capacity of 6–15 metric tons). Overall sales are 51% in the U.S., 32% in Europe and 17% in the Rest of the World. The company also provides customer support for its products with the supply of aftermarket parts, finance and leasing services.

 
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