Paccar (PCAR, Financial) recently released its results for the second quarter. Its results were impressive with a good increase in both the top and bottom lines. Paccar’s management thinks that the strong results reflect the benefits of an increase in truck sales in the U.S. and Canada. The company is also seeing good demand for aftermarket parts and financial services. With this strong traction, Paccar seems well positioned for better results in the future. Let us take a closer look at Paccar’s moves, as well as some other peers that can be a threat to the company in this booming and competitive market.
Paccar's progress
In the recently reported second quarter, Paccar’s revenue increased 6.4% to $4.27 billion. Its financial services revenue grew by 4.8% to $302.6 million. The company also enjoyed good results on the back of increasing sales which supported Paccar even in the declining market. The truck sales rose 5.7% to $3.46 billion. In comparison, sales of parts increased 9.7% to $778 million. On the earnings front, its earnings rose impressively by 9.5% on the back of strong demand for its commercial trucks and parts.
Paccar is the second largest heavy-duty truck manufacturer in North America based on sales volume, behind Daimler AG. The company had been performing well in the past and has yet again kept their commitment which is reflected by its impressive second quarter results. It might be a tough job for Paccar to retain its investors in the sluggish truck market, but its robust sales and demand for the after parts proved a rudder to the sinking ship for Paccar. Paccar seems confident of delivering better results in future on the back of improving sales. Paccar sees that the sales have been improving in recent quarters in the U.S as the economy is showing positive signs of a recovery.
Seeing an improvement in demand
The weak U.S economy had been playing a negative role for many companies in the past. But the reports say that the economy is recovering. This is a good sign as the recovering economy will benefit many industries such as steel and automotive. The steel prices are expected to be low and due to which the automotive market is also expected to boom. The auto sales are expected to grow at a good pace. Forecasts tell us that auto sales in the U.S. are expected to be over 16 million vehicles in the current year.
This will be another great opportunity for Paccar as growth in the automotive market will surely improve the demand to trucks and the aftermarket parts in which Paccar deals. This strengthens Paccar’s long-term prospects as well making it a strong investment option for long term.
Paccar is confident of a better third quarter as it expects the margins to improve fractionally on the back of higher production and improved operating efficiencies. Moreover, in Europe, the economy is trending positively.
Conclusion
The financials of Paccar are strong. Moving on to the fundamentals, the company appears cheap with a trailing P/E of 17.67, and the strong prospects are expected to improve its market share in the coming days. All these facts are in favor of Paccar, and the growing auto market in the U.S., along with a positive economy, shows that there is more upside to be had. Investors should consider an investment in Paccar.
