Paccar (PCAR) Q1 2015 earnings summary

Executive summary

• Q1 net sales and financial services revenues rose 10% to $4,832.7M from $4,379.9M; net income increased 38% to $378.4M from $273.9M.

• Delivered 38,300 trucks, up 20% YoY, on stronger North American and European demand.

• Diluted EPS was $1.06 vs. $0.77; return on revenues improved to 7.8% from 6.3%.

Financial highlights

• Income before taxes increased to $561.7M from $406.5M; income taxes were $183.3M vs. $132.6M.

• Operating cash flow rose to $476.2M from $285.7M; cash and marketable debt securities totaled $2,791.9M at March 31.

• Currency translation reduced Truck and Other revenue by $231.7M, Parts revenue by $48.7M, and Financial Services revenue by $16M.

• Translation effects on pretax profit were largely offset by a natural hedge from European-sourced engine components used in North American production.

Outlook and guidance

• 2015 U.S. and Canada Class 8 retail sales forecast at 260,000–290,000 units; Europe over-16-tonne registrations forecast at 220,000–250,000.

• South American heavy-duty truck sales forecast at 90,000–110,000 units; North American Class 6–7 market forecast at 70,000–80,000 trucks.

• Q2 truck deliveries expected to rise 5%–7% sequentially, with production growth broadly even in North America and Europe; gross margins projected slightly above Q1.

• Parts sales expected to grow 6%–10% in North America; Europe deliveries forecast to rise 4%–7%; consolidated Parts revenue growth forecast at 2%–5% at current exchange rates.

• Capital spending targeted at $325M–$375M and R&D at $225M–$250M; Financial Services average earning assets expected to remain similar to current levels.