PACCAR's Low Inventory Helps Offset New-Truck-Order Doldrums

PACCAR Inc. (NASDAQ:PCAR) expects first-quarter orders for new Class 8 trucks to fall 5-7%, but its comparatively low inventory should limit production cuts, the truck maker told analysts Tuesday after reporting record revenue and profits for 2019.

The parent company of Kenworth and Peterbilt claimed 30% of the U.S. and Canadian market in 2019 and had 34% of the industry's backlog of trucks waiting to be built, CEO Preston Feight said on PACCAR's call with analysts.

PACCAR's European brand DAF finished 2019 with a 16.2% share in Europe and a dominant position in Brazil, where sales grew 60% during the year.

In the U.S. and Canada, PACCAR maintained a larger backlog for much of 2019 compared to competitors either caught short of production capacity, like Daimler Trucks North America, or others, like Navistar International Corp. (NYSE:NAV), which reversed capacity additions.

Kenworth and Peterbilt have a combined 18,000 units, or a two-month supply, in dealer inventories. That is about 25% of the overall industry's 73,000-unit inventory, Feight said. Some of those units are with chassis upfitters filling custom use orders, meaning they are sold units.

PACCAR sold trucks equipped with its own MX engine to 47% of customers in the fourth quarter. For the year, in-house powertrains were used in 43% of trucks sold. Cummins Inc. (NYSE:CMI) also supplies engines for PACCAR trucks.

"We have fantastic products and there's just a strong demand," Feight responded to an analyst who asked how PACCAR is beating the competition during the industry downturn. "We build to order and that is what is driving our improved share."

By The Numbers

PACCAR posted fourth-quarter revenues of $6.12 billion, compared with $6.28 billion in the same period in 2018. Earnings were $531.3 million, or $1.53 per diluted share, in the fourth quarter, compared with $578.1 million, or $1.65 per diluted share, in the fourth quarter of 2018.

For all of 2019, PACCAR reported record revenues of $25.6 billion, up 9% over revenues of $23.50 billion in 2018. Earnings of $2.39 billion, or $6.87 per diluted share, were also a record and 9% higher than the $2.2 billion, or $6.24 per diluted share, earned in 2018.

Fourth-Quarter Financial Highlights:

• Consolidated net sales and revenues of $6.12 billion
• Net income of $531.3 million
• PACCAR Parts revenue of $993.9 million
• PACCAR Parts pretax income of $205.2 million
• PACCAR Financial Services earnings of $68.1 million
• PACCAR capital projects and research and development of $323.2 million

PACCAR Inc. shares closed at $76.77, up 2.14%, or $1.60 in NASDAQ trading on Tuesday following the company's report of record revenue and profits in 2019 and low inventories heading into what is expected to be a slow quarter for new Class 8 truck sales. (FreightWaves SONAR/STOCK.PCAR)

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