Yahoo Finance PACCAR Inc (NASDAQ:PCAR) Q1 2024 Earnings Call Transcript
PACCAR Inc (NASDAQ:PCAR) Q1 2024 Earnings Call Transcript April 30, 2024
PACCAR Inc beats earnings expectations. Reported EPS is $2.27, expectations were $2.17. PCAR isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning and welcome to PACCAR’s First Quarter 2024 Earnings Conference Call. All lines will be in a listen-only mode until the question-and-answer session. Today’s call is being recorded and if anyone has any objection, they should disconnect at this time. I’d now like to introduce Mr. Ken Hastings, PACCAR’s Director of Investor Relations. Mr. Hastings, please go ahead.
Ken Hastings: Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR’s Director of Investor Relations. And joining me this morning are Preston Feight, Chief Executive Officer; Harrie Schippers, President and Chief Financial Officer; and Brice Poplawski, Vice President and Controller. As with prior conference calls, we will ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties, including general economic and competitive considerations that may affect expected results. For additional information, please see our SEC filings and the Investor Relations’ page of paccar.com. I would now like to introduce Preston Feight.
Preston Feight: Hey, good morning. Harrie, Brice, Ken and I will update you on our excellent first quarter results and business highlights. I’d like to begin by thanking PACCAR’s outstanding employees who do a great job providing our customers with the highest quality trucks and transportation solutions in the industry. PACCAR achieved excellent revenues and net income in the first quarter due to the strong performance of its truck, aftermarket parts and financial services businesses. PACCAR achieved revenues of $8.74 billion and net income of $1.2 billion. This is comparable to adjusted net income of $1.18 billion in the first quarter of last year. Truck parts and other gross margins were 19% in the first quarter. PACCAR’s margin is benefiting from investments in new truck models, good global performance and PACCAR Parts continued growth.
PACCAR Parts achieved record quarterly pretax income of $456 million, 6% higher than the $439 million earned in the first quarter of 2023. 2024 quarterly parts revenues increased to $1.68 billion and we are pleased with the continued growth at PACCAR Parts after a record setting 2023. PACCAR Financial had a good quarter, achieving pretax income of $114 million. These results are comparable to the fourth quarter of 2023. Looking at the U.S. economy, GDP is estimated to grow 2.4% this year with a resilient labor market and healthy consumer spending. The vocational sector, where Peterbilt and Kenworth are the market leaders, remains strong with continued infrastructure investments. The less than truckload market is also performing well while being offset by a softer truckload segment.
Kenworth and Peterbilt’s share in the first quarter was 30.3%, up from 27% in the same period last year. Overall, we estimate this year’s U.S. and Canadian Class 8 market to be in a range of 250,000 to 290,000 trucks. In the medium-duty markets, the new best-in-class Kenworth and Peterbilt models increased their combined first quarter share to 17%. We expect this year’s medium-duty market to be around 100,000 units. In Europe, economies and the truck market are softer this year. DAF’s premium new trucks provide customers with the latest technology and best operating efficiency. We project the 2024 European above 16-ton market to be in a range of 260,000 to 300,000 trucks. The South American above 16-ton truck market is expected to be in the range of 105,000 to 115,000 vehicles this year.
In Brazil, DAF achieved a record 10.7% share in the first quarter, compared to 8.6% in the same period last year. DAF trucks are highly desired by customers in South America, and the region is an important part of PACCAR’s growth and success. In the third quarter of last year, PACCAR announced a commercial vehicle battery joint venture, and construction of the 21-gigawatt hour factory located in Mississippi is expected to begin this quarter. PACCAR anticipates investing $600 million to $900 million over the next several years in this factory to create cost efficient commercial vehicle batteries. PACCAR’s industry-leading trucks expanding parts business best-in-class financial services and advanced technology strategy position the company well for an excellent future.
Harrie Schippers will now provide an update on truck deliveries, PACCAR Parts, PACCAR Financial Services and other business highlights. Harrie?
Harrie Schippers: Thanks, Preston. PACCAR delivered 48,100 trucks during the first quarter and anticipates second quarter deliveries to be around 48,000. PACCAR achieved excellent truck parts and other gross margins of 19% in the first quarter. We anticipate second quarter margins to be strong and in a range of 18% to 18.5%. PACCAR Parts had an outstanding first quarter with parts gross margins of 32.5%. We estimate parts sales to grow by 4% to 6% in the second quarter following last year’s record performance. PACCAR Parts’ excellent long-term growth reflects the benefits of investments in transportation solutions that increase vehicle uptime and convenience for customers. PACCAR’s aftermarket parts business provides strong profitability through all phases of the business cycle.
PACCAR Parts has 19 parts distribution centers, or PDCs worldwide and is expanding its global distribution network with the construction of a new PDC in Germany which will open this year. PACCAR Financial Services benefited in the first quarter from excellent portfolio quality. Pretax income was $114 million. Used truck prices have normalized. With its larger portfolio and superb credit quality, PACCAR Financial is having another good year. PACCAR achieved an industry-leading return on invested capital of 28% in the first quarter. In 2024, we’re planning capital investments in the range of $700 million to $750 million and R&D expenses in the range of $460 million to $500 million. As we continue to invest in key technology and innovation projects these include clean diesel combustion engines, battery and hydrogen electric powertrains, advanced driver assistance systems and new connected vehicle services.
PACCAR is also investing in manufacturing capacity to support future growth, including expansions at Kenworth, Peterbilt, PACCAR Mexico and at DAF in Brasil and Europe. We’re also investing in a new PACCAR engine remanufacturing facility in Columbus, Mississippi and in the new battery joint venture. We expect 2024 to be an excellent year. Thank you, but please to answer your questions.
See also
25 Countries with the Highest Informal Employment in the World and
Republicans are Buying These 10 Oil and Gas Stocks.
To continue reading the Q&A session, please click here.
