Paccar (PCAR) Q2 2015 earnings summary

Executive summary

• Q2 revenue reached a record $5,079.9M and net income a record $447.2M, up 40% YoY; diluted EPS was $1.26 vs. $0.90.

• H1 revenue rose to a record $9,912.6M and net income to a record $825.6M, up 39% YoY.

Financial highlights

• Q2 after-tax return on revenue was 8.8%; Truck, Parts and Other gross margin was 15.1%, supported mainly by operating leverage and cost control.

• Q2 cash generated from operations was $710.9M; H1 operating cash flow was $1,187.1M vs. $840.8M.

• Cash and marketable debt securities totaled $3,360.4M at June 30, up $350.8M from year-end.

• Weaker currencies reduced Q2/H1 Truck revenue by $261.8M/$493.5M and Parts revenue by $56.2M/$104.9M.

Outlook and guidance

• 2015 U.S./Canada Class 8 retail sales forecast at 270,000-290,000 units; Europe over-16-ton registrations at 240,000-260,000; South American heavy-duty sales at 70,000-80,000.

• Q3 global truck production expected to decline 1%-2% QoQ; summer shutdowns and higher large-fleet delivery mix expected to weigh on margins.

• 2015 capital investment guidance was $325M-$375M and R&D $225M-$250M, focused on powertrain development and operating efficiency.

• 2015 Parts sales expected to grow 6%-9% in North America; European deliveries expected to increase 4%-7%, with euro translation a potential offset to reported sales.

• H2 operating cash flow expected to be consistent with H1; investment spending and R&D expected to accelerate.