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Paccar Profits Up Despite Slower Truck Sales

The parent company of truck manufacturers Kenworth and Peterbilt on Tuesday reported an increase in second quarter earnings despite lower revenue.

Net income for Paccar Inc. (NASDAQ: PCAR) moved 7.6% higher from the same time a year earlier to $481.3 million, or to $1.37 per share from $1.26 per share, as sales and financial services revenue fell 13.2% to $4.41 billion.

Truck sales and revenue for the company fell to $3.3 billion in the most recent quarter from nearly $4 billion a year earlier. Its parts segment revenue dropped to $756.4 million from $776.5 million. In contrast, financial services revenue inched higher to $297.4 million from $293 million.

Paccar's pre-tax truck profit totaled $329.4 million, down from $420.1 million a year earlier. Paccar Parts generated quarterly pre-tax profit of $133.4 million compared to $145.7 million in the second quarter of 2015. Paccar Financial Services reported second quarter pre-tax income of $77.3 million compared to $90.8 million a year earlier.

According to the company, Peterbilt and Kenworth are benefiting from the third best U.S. and Canada Class 8 truck market in the last 10 years, and have achieved 27% market share year-to-date this year.

“The truck market reflects the good economy and high freight tonnage levels,” said Gary Moore, Paccar executive vice president.

The company is forecasting Class 8 truck industry retail sales for the U.S. and Canada in 2016 of 220,000 to 240,000 vehicles. However, Paccar's second quarter new truck deliveries for the U.S. and Canada were down sharply from 26,800 in the second quarter of last year to 19,800 in the most recent quarter.

In Europe, where Paccar sells its DAF brand trucks, it's projecting industry sales in the above-16-tonne truck market to be 280,000-300,000 vehicles this year and describes the market as the strongest there since 2008.

“The European above-16-tonne truck market continues to strengthen due to positive economic growth and increased freight activity,” said Preston Feight, DAF president and Paccar vice president. “DAF achieved market share of 16% in the first half of 2016. DAF's above 16-tonne truck registrations increased 28% year-to-date compared to the same period last year.”

European truck deliveries for Paccar increased to 13,100 from 11,200 a year earlier.

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Fuel prices keep right on falling

Average retail pump prices for both diesel and gasoline continued declining across every region of the U.S. this week, according to data tracked by the Energy Information Administration (EIA).

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Diesel Fuel Prices Continue to Drop

Source: EIA

The average price of diesel fuel fell again last week, continuing a steady decline in prices that began over a month ago, according to the latest numbers from the Energy Department.

The price of on-highway diesel fuel dropped by 2.3 cents last week, falling to $2.379 per gallon nationally at the pump. The price is 34.4 cents cheaper than it was in the same week a year ago.

When breaking down prices by region, the largest decrease was in the Midwest, which saw a 2.8-cent drop last week. The smallest change in prices was in the Rocky Mountains, which saw a 0.1-cent decline.

The average price of regular gasoline also fell last week, dropping by 4.8 cents per gallon and settling at $2.182. The price is 56.3 cents cheaper than it was in the same week in 2015.

Mirroring diesel prices, the largest decrease in gas prices was in the Midwest with a 7.4-cent drop week to week. The smallest decrease in prices was in the Rocky Mountain region, falling 1.2 cents last week.

After a surge in energy prices for most of 2016, crude oil prices also appear to be on a slide, closing at a three-month low on July 25, according to a CNBC report. The oil supply glut, which was caused by increasing production and decreasing demand, looks to still be an issue, and the market reflects that it is unlikely to change in the short term.

Related: How to Implement a Fuel Hedging Program

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