Earnings Watch: Volvo, Paccar Increase 1st Quarter Profits Amid Higher Sales

Volvo and Paccar both reported that profits moved higher in the first quarter of the year as sales also improved, increasing their predictions for the Class 8 truck market for 2018.

Sweden’s Volvo AB reported profit of 5.65 billion kronor ($665.7 million) compared to 4.58 kronor a year earlier. Net sales increased 16% to 89.14 billion kronor, thanks to what the company described as “good demand in most markets globally.”

The parent to Volvo Trucks and Mack Trucks in North America said it increased truck order intake by 29%. North America stood out with an increase of 107%, while output of truck deliveries increased by 17% compared to a year ago.

Volvo AB, which also produces construction equipment, buses and marine equipment, said while earnings in construction equipment continued to increase strongly while trucks were on par with last year, it is still not satisfied with the results.

According to Martin Lundstedt, president and CEO, the increase in truck volumes had a positive impact, but profitability was hampered by the transition to a new lineup of truck models in North America and a continued strained situation in parts of the supply chain.

“In North America, a continued improvement in the economy and high demand for freight combined with a shortage of transport capacity has led to increasing freight rates and a significant pick-up in demand for highway trucks,” Volvo said its first quarter report. “The total market forecast for retail sales in 2018 is increased to 300,000 heavy-duty trucks.”

The figure is 20,000 more trucks than Volvo earlier forecast for 2018 sales.

In North America, Volvo Trucks increased its market share to 10.2% as of March, while Mack’s market share fell to 6.5%. According to the company, this reflected the decrease in production output in conjunction with the transition to the new truck models.

“In North America both Volvo and Mack had a strong order intake in the first quarter, with a continued good demand for construction trucks and an especially strong development in the highway segment,” Volvo said.

Paccar Benefits from Record Quarterly Truck Deliveries

Paccar Inc. reported net income of $512.1 million, or $1.45 per share, in the first quarter of this year, 65% higher than the $310.3 million earned in the same period last year.

First quarter 2018 net sales and financial services revenues were $5.65 billion, 33% higher than a year earlier for the parent of Peterbilt, Kenworth, and DAF.

“Paccar benefited from record quarterly truck deliveries driven by strong market share and robust global truck demand, as well as record quarterly Paccar Parts revenues and pretax profits,” said CEO Ron Armstrong.

Paccar Parts earned record quarterly pretax income of $191.8 million in the first quarter of 2018, 27% higher than the same period last year, while it generated revenue of $939.9 million, a 19% increase.

The company also reported first quarter 2018 U.S. and Canada Class 8 truck industry orders were more than double the same period last year. Deliveries increased to 24,200 trucks from 17,000.

“The truck market reflects the strong economy and excellent freight demand," said Gary Moore, Paccar executive vice president. "We’ve increased our estimate of 2018 Class 8 truck industry retail sales for the U.S. and Canada to a range of 265,000-285,000 vehicles,”