Paccar Q1 Earnings Soar as Truck, Parts Margins Jump
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Paccar saw its earnings jump 22% year-over-year in the three months that ended March 31 on the back of record revenue and a jump in margins, even after taking a settlement charge of more than $400 million, the truck manufacturer said April 25.
Bellevue, Wash.-based Paccar posted net income of $733.9 million, or $1.40 per diluted share, in the first quarter of 2023, compared with $600.5 million, $1.15, in the first quarter of 2022, winning plaudits from analysts.
Paccar posted revenue of $8.47 billion in the most recent quarter, compared with $6.47 billion in the same period in 2022, it said.
Absent a $446.4-million after-tax, nonrecurring charge related to civil litigation in Europe, Paccar reported adjusted net income of $1.18 billion or $2.25 per diluted share for the quarter, the parent company of Kenworth, Peterbilt and DAF said. The litigation followed a 2016 settlement with the European Commission after an investigation of European truck manufacturers.
Paccar delivered a total of 51,100 trucks globally in the first quarter of 2023, compared with 43,000 in the same period a year earlier, it said. Of the most recent quarter’s total, some 26,000 were delivered in the United States and Canada compared with 20,700 in the year-ago period. The original equipment manufacturer did not break down the figures by brand, class of vehicle or country.
Schippers
Chief Financial Officer Harrie Schippers said during the company’s earnings call that Paccar expects to deliver 51,000 to 54,000 trucks globally in the second quarter of 2023.
Looking further forward, Paccar CEO Preston Feight added during the call that Paccar’s third-quarter 2023 order book was substantially full. He said that the company’s fourth-quarter order book had a few slots left, but was also substantially full.
Paccar is seeing some trimming of demand in the North American truckload market, but there are very strong locational markets, Feight said. He said the company was already having strong conversations about 2024 orders.
In addition, Feight told analysts and reporters that while freight tonnage may be down, there remains good demand for new Paccar products because replacement of trucks in the past three or four years has lagged.
Still, supply chain disruptions were not finished yet, said Feight, and this would “act as a throttle” on Paccar production volumes. The severity of those issues would decrease, but there would be periodic problems, Schippers said.
Feight
The company’s long-term investments in new truck models, advanced manufacturing and a dynamic aftermarket parts business had led to higher operating margins, Feight said in the earnings statement.
During the earnings call, Feight said Paccar’s truck and parts gross margin in the first quarter was 19.3%. Paccar’s 2022 gross margin was below 15%, the company said in previous statements. Its parts margin was 32.2% in the most recent quarter, Schippers said.
Such an increase in margin was “nothing short of spectacular,” JP Morgan analyst Tami Sakari said during the call. Feight noted that costs increased less than expected in the quarter, aiding Paccar’s margins. In the second quarter of 2023, Paccar expects an 18-19% gross margin, Schippers said.
The aftermarket parts business, Paccar Parts, posted record revenue of $1.62 billion in the most recent quarter, compared with $1.39 billion in the first quarter of 2022, the company said.
Paccar Parts saw a 17% increase year-over-year in sales in the first three months of 2023, Schippers said. For the full year, parts sales growth is expected to average 10-12%, he said.
Paccar expects its research and development capital spending to be between $380 million and $420 million, Schippers said. It expected to spend $360 million to $410 million on R&D in 2023 at the end of 2022. The company’s 2022 R&D capex totaled $341.2 million.
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