PACCAR Inc. (PCAR) announced that it would invest nearly $200 million over a span of two years in Brazil for building a truck manufacturing plant on the back of a strong demand in the region. The plant would produce three models of trucks under its DAF nameplate
Last month, automobile production in Brazil rose a tad 1.9% to 280,128 cars and trucks while sales increased 4.1% to 289,189 vehicles on a year-over-year basis.
Brazil government raised interest rates and increased taxes on credit in an effort to curb spending as inflation threatens to break past the 6.5% upper limit of the central bank’s guidance. However, the move has significantly affected the availability of credit in the market, thwarting consumer confidence.
Brazil is a key market for the world’s biggest automakers, including Italy’s Fiat SpA (FIATY), Germany’s Volkswagen AG and U.S.-based General Motors Co. (GM) and Ford Motor Co. (F).
In the first quarter of 2011, PACCAR reported an almost threefold increase in profit to $193.3 million or 53 cents per share 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.
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).
The company’s sales expected to improve in Brazil with the introduction of new legislation in January 2012 that sets stricter environmental standards for truck engines.
FORD MOTOR CO (F): Free Stock Analysis Report
FIAT SPA (FIATY): Free Stock Analysis Report
PACCAR INC (PCAR): Free Stock Analysis Report
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