European Truck Sales Slump Hurts Paccar Q2 Profits
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Paccar Inc. profits fell in the second quarter of 2024 on the back of sagging European truck sales and lower parts and financial services divisions profits.
However, the company’s truck sales in North America rose as Kenworth Truck Co. and Peterbilt Motors Co. increased their Class 8 market share in the most recent quarter.
Paccar posted net income of $1.12 billion or $2.13 per diluted share in Q2, down 8.2% compared with $1.22 billion, $2.33, in the year-ago period, the parent company of Class 8 truck manufacturers Kenworth and Peterbilt said.
The company’s earnings did not meet consensus analyst expectations of $2.14 per diluted share.
Feight
Bellevue, Wash.-based Paccar reported Q2 revenue of $8.77 billion, down 1.2% from $8.88 billion a year earlier. The company’s truck division posted revenues of $6.58 billion in the most recent three months, down 3.7% compared with $6.83 billion a year earlier.
“Paccar achieved excellent revenues and net income in the second quarter of 2024,” CEO Preston Feight said. “Paccar’s truck and parts operations achieved robust quarterly sales and profits due to industry-leading trucks and strong aftersales performance that enhanced customer uptime. Paccar Financial Services delivered good profitability due to its growing, high-quality portfolio.”
The company posted a profit of $2.32 billion in the first half of 2024, up 18.4% compared with net income of $1.96 billion a year earlier, although the latter included a $446.4 million after-tax, nonrecurring charge related to civil litigation in Europe.
In the most recent quarter, Paccar’s truck deliveries globally totaled 48,400, down compared with 51,900 in the year-ago period.
Truck deliveries in the U.S. and Canada totaled 28,700 in Q2, up 4.4% compared with 27,500 a year earlier. However, European deliveries slumped 29.9% to 11,500 from 16,400 in the year-ago period.
Much softer conditions in Central and Eastern Europe took a heavy toll on overall European deliveries for Paccar’s DAF brand of trucks, Chief Financial Officer Harrie Schippers said during the company’s quarterly analyst call, but he said this would not lead to price cuts.
Peterbilt and Kenworth achieved a combined Class 8 market share of 31.5% in the first half of 2024, compared with 27.7% a year earlier. Paccar did not provide figures for Q2, but in the company’s first-quarter results reported on April 30 said Q1’s market share was 30.3%, compared with 29.5% a year earlier. It does not break down the numbers by brand.
“The vocational market remains strong. The less-than-truckload market remains strong,” Feight said during the company’s Q2 analyst earnings call. But truckload customers continue to see low spot and contract rates when there might have been expectations that a recovery in the segment would already be underway, he said.
Paccar's exhibit booth proved a popular draw at CES 2024. (Seth Clevenger/Transport Topics)
Demand for Peterbilt and Kenworth trucks was evident in inventory levels, Feight said, with Paccar’s inventory running at around 3.3 months, compared with an industrywide figure of around 3.9 months.
Continued U.S. infrastructure spending and its impact on demand for vocational trucks in particular is set to boost Paccar sales for some time to come, Feight added.
The company said U.S. and Canada Class 8 truck industry retail sales are estimated to be in a range of 240,000-280,000 trucks in 2024, down from a 250,000-290,000 retail sales estimate in the Q1 earnings release.
While Paccar truck sales increased in Q2, and Kenworth and Peterbilt improved their Class 8 market share, the company cut its overall market expectations.
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Globally, Paccar expects to deliver 43,000-44,000 trucks in the third quarter, Schippers said during the call, which he said reflects normal truck markets.
Paccar’s order book for Q3 has a few openings remaining, while the fourth-quarter order book is about half-full, Schippers said. Feight later added that this level “was exactly in the wheelhouse of normal.”
Looking further forward, Feight told analysts that potential changes to federal emissions regulations as a result of November’s presidential election are unlikely to change the number of trucks Paccar or its competitors sell in the coming years.
In addition to a steep slide in European truck sales, weaker profits from Paccar’s parts and financial services divisions also hurt the company’s results.
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Paccar Parts posted Q2 pretax income of $413.8 million, down 1.3% compared with $419.3 million a year earlier. That said, the parts division posted $1.66 billion in Q2 revenue, up 3.75% from $1.6 billion in the year-ago period.
The company plans to open parts distribution centers in Colombia and Germany in the coming months, Schippers told analysts, although the aftersales market is softening at the moment. Paccar Parts’ revenue growth in a declining market is all the more admirable, he added.
Paccar Financial Services reported pretax income of $111.2 million in Q2, down 23.2% from $144.7 million a year earlier, although it posted Q2 revenue of $509.8 million, up 15.9% from $439.8 million in the same period in 2023.
