Paccar (PCAR) Q2 2016 earnings summary

Executive summary

• Q2 revenue was $4,413.2M; reported net income was $481.3M, including a favorable $109.6M EC charge adjustment, while adjusted net income was $371.7M.

• H1 revenue was $8.71B; adjusted net income was $719.7M, while reported net loss was $113.3M after the $833.0M EC charge.

Financial highlights

• Q2 diluted EPS was $1.37 reported and $1.06 adjusted; H1 diluted EPS was $(0.32) reported and $2.05 adjusted.

• Truck, Parts and Other revenue was $4.12B; Financial Services revenue was $297.4M, up from $293.8M year over year.

• Q2 Truck, Parts and Other income before tax was $562.5M versus $556.1M; Financial Services income before tax was $77.3M versus $90.8M.

• H1 operating cash flow was $1,649.4M; cash and marketable securities totaled $3.40B in manufacturing operations at quarter-end.

Outlook and guidance

• 2016 U.S. and Canada Class 8 retail sales forecast was 220,000–240,000 units; Europe over-16-tonne registrations were forecast at 280,000–300,000.

• Full-year truck margin outlook remained 14.5%–15%; Q3 production and margins were expected slightly lower than Q2, largely due to DAF’s summer shutdown.

• Capital spending was estimated at $325M–$375M and R&D at $240M–$260M, focused on product development, facilities and aftermarket support.

• North American Parts sales were expected comparable to 2015; H2 Parts sales were also expected to exceed H1 by 2%–4%, with full-year outlook moderated amid softer activity.

• Financial Services H2 pre-tax performance was expected comparable to H1; South America heavy-duty sales were forecast at 60,000–70,000 units.