Record Parts and Lending Buoy Paccar's Q3 Results

Paccar Inc. rode record parts sales and higher used truck prices to higher Q3 revenues and a slight decline in profits — its first miss at beating analysts' estimates for earnings per share in a year.

The Bellevue, Washington-based parent of Kenworth and DAF Trucks and Peterbilt Motors announced Oct. 4 that a shortage of semiconductors reduced Q3 deliveries of Class 8 trucks by 7,000 units. Kenworth and Peterbilt are parking unfinished trucks until missing semiconductors and other parts are available to finish them.

Peterbilt dealer W.M. "Rusty" Rush, CEO of Rush Enterprises, said last week he thinks as many as 40,000 trucks across the industry are in a similar condition.

Paccar's Pivot

Paccar Financial Services (PFS) relied on its inventory of more than 199,000 used tractors and trailers to help offset profits missing from new truck orders the company could not deliver.

"PFS achieved record third-quarter results due to excellent portfolio quality and strong used truck prices," Paccar Vice President Todd Hubbard said in a press release. "PFS is leveraging investments in its 12 worldwide used truck centers to sell an increased number of used trucks at higher retail prices."

Kenworth and Peterbilt truck resale values command a 10% to 20% premium over competitors' trucks, Hubbard said.

The paucity of new trucks is forcing fleets to keep trucks in service longer. That, in turn, is creating more maintenance business, of which Paccar took advantage in the quarter.

Paccar Parts achieved record Q3 pretax profit of $280.8 million, up 34% compared to $210.2 million in the year-ago quarter. Q3 revenues were a record $1.26 billion, compared to $1.02 billion in Q3 last year.

"Third-quarter parts sales and profits benefited from high customer vehicle utilization, industry-leading logistics operations, strong demand for powertrain components, and the growth of our e-commerce platform," said David Danforth, Paccar Parts general manager.

The Rest of the Numbers

Kenworth, Peterbilt, and DAF delivered 32,800 trucks in the third quarter after accounting for the 7,000 undeliverable trucks. Production of the refreshed Kenworth T680 and Peterbilt Model 579 began in the quarter along with new Class 5-7 medium-duty models for each brand.

"Customer demand for the new Kenworth, Peterbilt, and DAF trucks introduced this year is very strong," CEO Preston Feight said.

Paccar's Q3 net income of $377.7 million, or $1.08 per diluted share, compared to $385.5 million, or $1.11, in the year-ago period. A consensus of analysts surveyed by investor site Seeking Alpha called for $1.20 per share. Q3 revenues were $5.15 billion, compared to $4.94 billion a year ago.

Paccar PCAR expects global truck production to improve as supply chain deliveries are resolved. The company estimates U.S. and Canada Class 8 truck industry retail sales will range between 230,000 and 250,000 vehicles this year. 

Assuming improvements in the supply chain, Paccar estimates 2022 industry retail sales of Class 8 trucks of 250,000 to 290,000 vehicles.

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