Paccar Profits Up Despite Slower Truck Sales

UPDATED -- The parent company of truck makers Kenworth and Peterbilt reported an increase in second quarter earnings despite lower revenue, but it's in the red for the first half of the year due to a big fine.

Net income for Paccar Inc. (NASDAQ: PCAR) moved 7.6% higher from the same time a year earlier to $481.3 million, or to $1.37 per share from $1.26 per share, as sales and financial services revenue fell 13.2% to $4.41 billion.

Truck sales and revenue for the company fell to $3.3 billion in the most recent quarter from nearly $4 billion a year earlier. Its parts segment revenue dropped to $756.4 million from $776.5 million. In contrast, financial services revenue inched higher to $297.4 million from $293 million.

Paccar's pre-tax truck profit totaled $329.4 million, down from $420.1 million a year earlier. Paccar Parts generated quarterly pre-tax profit of $133.4 million compared to $145.7 million in the second quarter of 2015. Paccar Financial Services reported second quarter pre-tax income of $77.3 million compared to $90.8 million a year earlier.

According to the company, Peterbilt and Kenworth are benefiting from the third best U.S. and Canada Class 8 truck market in the last 10 years, and have achieved 27% market share year-to-date this year.

“The truck market reflects the good economy and high freight tonnage levels,” said Gary Moore, Paccar executive vice president.

The company is forecasting Class 8 truck industry retail sales for the U.S. and Canada in 2016 of 220,000 to 240,000 vehicles. However, Paccar’s second quarter new truck deliveries for the U.S. and Canada were down sharply from 26,800 in the second quarter of last year to 19,800 in the most recent quarter.

In Europe, where Paccar sells its DAF brand trucks, it’s projecting industry sales in the above-16-tonne truck market to be 280,000-300,000 vehicles this year and describes the market as the strongest there since 2008.

“The European above-16-tonne truck market continues to strengthen due to positive economic growth and increased freight activity,” said Preston Feight, DAF president and Paccar vice president. “DAF achieved market share of 16% in the first half of 2016. DAF’s above 16-tonne truck registrations increased 28% year-to-date compared to the same period last year.”

European truck deliveries for Paccar increased to 13,100 from 11,200 a year earlier.

Despite the improved second quarter results, Paccar reported a loss of $113.3 million for the first six months of the year compared to a profit of $825.6 million during the same time in 2015. Much of this is due to $833 million it has agreed to pay as fine as part of a price-fixing scheme in Europe involving its DAF brand.

Net sales and financial services revenues for the first six months of 2016 were $8.71 billion compared to $9.91 billion last year. Worldwide new truck deliveries fell to 72,100 from 79,000 over the same time frame, due almost entirely to a decline in the U.S. and Canada.

Update (6:00 p.m. EDT) adds six-month earnings.