PACCAR Inc. (PCAR) has reported a profit of $99.6 million or 27 cents per share in the second quarter of the year that more than tripled from $26.5 million or 7 cents per share in the prior-year quarter. With this, the truck maker has exceeded the Zacks Consensus Estimate of 20 cents per share for the quarter.

Revenues in the quarter surged 33% to $2.46 billion, up from the Zacks Consensus Estimate of $2.06 billion. The improved results were attributable to stronger truck sales around the world, especially with its DAF nameplates, as well as a rise in Financial Services profits.

Revenues in the Truck and Other segment shot up 39% to $2.22 billion due to increased freight tonnage, higher fleet utilization and increased maintenance for its aging trucks. The pre-tax profit in the segment improved significantly to $110.3 million from $7.4 million a year ago.

Despite a 3% decline in revenues to $239.3 million, pretax income in the PACCAR Financial Services (PFS) segment more than doubled to $34 million from $15.6 million in the second quarter of 2009.

The improvement in PFS results was attributable to a 10% fall in interest and other expenses to $162.6 million and an improvement of 31% in provision for credit losses to $20.2 million.

Financial Position

PACCAR’s cash and marketable debt securities increased a tad to $2.12 billion as of June 30, 2010 from $2.06 billion as of December 31, 2009. Long-term debt fell marginally to $172.1 million from $172.3 million as of December 31, 2009. Consequently, the long-term debt-to-capitalization ratio remained steady at 3% for the first half of the year.

In the first half of 2010, cash flow from operations increased significantly to $799.5 million from $410 million in the same period of 2009, primarily driven by an improvement in profits. Meanwhile, capital expenditures rose to $47.8 million from $30.2 million in the previous year, due to new product development.

Outlook

PACCAR expects industry sales in the above 15-ton truck market in Europe in the range of 160,000-170,000 units for 2010. The company anticipates industry retail sales in the Class 8 truck markets of Canada and the U.S. in the range of 110,000-130,000 vehicles in the year.

Our Call

PACCAR continues to gain market share, especially with its DAF nameplate. In 2009, the DAF label achieved a market share of 14.8% in the above 15-ton market, the highest share in its 81-year history. In the first half of 2010, the market share improved further to 16.3%.

Further, PACCAR expects to benefit from its fastest-growing businesses, PACCAR Parts and PACCAR Financial Services. These have led us to recommend the shares as Buy (Zacks #2 Rank) in the short term (1–3 months).
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