Paccar (PCAR, Financial) recently reported impressive financial numbers for the third quarter of 2014. The recent economic recovery and dwindling fuel prices are accelerating its sales numbers. Also, the growing freight volumes and refreshed fleets of the North American truck companies played a major role in its earnings this quarter.
Results and beyond
The Bellevue, Washington-based company for the third-quarter posted net sales of $4.93 billion, an uptick of 14% from $4.3 billion in the same quarter last year. Also, its net income rose 20% to $371.4 million or earnings of $1.04 per share as against $309.4 million or earnings of $0.87 per share in the corresponding period a year ago. The consensus was estimating earnings of $0.96 per share on the revenue of $4.46 billion for the quarter.
Looking ahead, the truck maker should benefit from its new innovative product offerings. Also, it expects to accelerate truck deliveries by 5% to 7% higher than the last quarter that should drive its top line performance this quarter. The company is seeing continued strength in the North America Class 8 markets that could lead to higher truck margins. In fact, the retail sales for the class 8 in the United States and Canada are expected to be in the range of 245,000 to 255,000 trucks this year.
This sales guidance reflects the highest level since 2006. Also, the company expects class 8 markets for these regions to accommodate approximately 240,000 to 270,000 trucks in fiscal 2015. This is an impressive 6% growth in class 8 truck market and should accelerate its sales and earnings next year. Meanwhile, it’s greater than 16-tonne market is also recovering. The truck maker expects the total sales for 16-tonne truck to range between of 210,000 to 220,000 trucks this year.
Potential investments to enhance its growth
Paccar remains on track to aggressively invest expanding its product offering and services. The truck giant is investing in its global product range, aftermarket support and manufacturing facilities. It projects its capital expenditure to be in the range of $325 million to $375 million. Also, its research and development expenditure are forecasted to range between $200 million and $250 million.
This investment in wide-ranging product and aftermarket support and manufacturing services should create competitive edge over its peers. Also, these high quality products and services across diversified markets across the world should strengthen its position and offer attractive returns to shareholders in the long-run.
In addition, Paccar should benefit from the many new exciting truck launches for its DAF division. It has at the Hanover Truck show introduced new DAF trucks. These trucks will now assist the company to tap other happening markets such as the construction, container, and refuse markets.
These new additions and offerings by Kenworth and Peterbilt should enhance its position in heavy-duty commercial truck markets. Also, the economic conditions in North America continuous to improve amidst of falling fuel prices. Also, the truck maker should benefit from the improving freight rates this quarter.
Conclusion
Paccar looks pretty good with these improving economic conditions across the world. Also, its strategic investment in new products and offerings should drive its growth in the future. Most of the analysts in the market expect its earnings to grow at CAGR of 12.30% for the next five years. This reflects sound growth prospects for the stock in the long-run. Also, its short-term returns look quite appealing as its earnings are projected to grow 15.20% this year and 11.60% by next year respectively.
The stock shares cheap valuations. It is trading at the trailing P/E of 19.32 and forward P/E of 16.63 under 20 that indicate high growth potential for the stock in the future. Moreover, its performance and wealth accretion metrics looks good. It has profit and operating profit margins of 7.03% and 10.32% respectively, while its ROE stands at 19.04% for the past twelve months. Its balance sheet carries total cash of $2.86 billion with total debt of $8.27 billion. Also, Paccar has operating cash flow of $2.28 billion and leveraged free cash flow of $190.6 million.
