PACCAR Inc. PCAR reported a 37.7% rise in earnings to $1.06 per share in the first quarter of 2015 from 77 cents recorded in the same quarter of 2014. Earnings also surpassed the Zacks Consensus Estimate of $1.00.

Net income surged 38% to $378.4 million from $273.9 million in the year-ago quarter. The rise in earnings was attributable to the increase in revenues from truck sales.

Revenues increased 10.3% to $4.83 billion, surpassing the Zacks Consensus Estimate of $4.69 billion.

Segment Results

Revenues in the Truck, Parts and Other segment increased 11.3% to $4.55 billion. Pre-tax income in the segment surged 48.4% to $467.6 million from $315.2 million a year ago.

Industry sales in the above 16-ton truck market in Europe are expected to be in the range of 220,000–250,000 units in 2015, higher than 200,000–240,000 units projected earlier. Meanwhile, PACCAR raised the guidance for Class 8 industry retail sales in the U.S. and Canada to 260,000–290,000 units from 250,000–280,000 vehicles guided earlier. Further, it expects the industry demand for heavy-duty trucks in South America to range between 90,000–110,000 units in 2015, lower than 110,000–130,000 units expected earlier.

Revenues in the Financial Services segment (comprising a portfolio of 168,000 trucks and trailers, with total assets of $11.8 billion) decreased 3.1% to $284.7 million, while pre-tax income rose 4.1% to $89.0 million in the reported quarter.

Financial Position

PACCAR’s cash and marketable debt securities amounted to $2.71 billion as of Mar 31, 2015, compared with $2.94 billion as of Dec 31, 2014. Long-term debt was absent in both the periods.

The company’s cash from operations increased to $476.2 million in the first quarter of 2015 from $285.7 million in the first quarter of 2014. The company recorded capital investments of $54.8 million and research and development (R&D) expenses of $56.2 million in the reported quarter.

The company has targeted capital investments of $325–$375 million and R&D expenses of $225–$250 million in 2015 for enhanced powertrain development, and the expansion of operating efficiency of assembly and distribution centers.

Zacks Rank

PACCAR currently carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Gentherm Inc. THRM, Allison Transmission Holdings, Inc. ALSN and General Motors Co. GM, all sporting a Zacks Rank #1 (Strong Buy). 

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