PACCAR Inc. (NASDAQ:PCAR) Q1 2018 Earnings Conference Call - Final Transcript

Apr 24, 2018 • 12:00 pm ET


PACCAR Inc. (NASDAQ:PCAR) Q1 2018 Earnings Conference Call - Final Transcript


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Good morning, and welcome to PACCAR's First Quarter 2018 Earnings Conference Call. All lines will be in a listen-only mode until the question-and-answer session. Today's call is being recorded, and if anyone has an objection, they should disconnect at this time.

I would now like to introduce Mr. Ken Hastings, PACCAR's Director of IR. Mr. Hastings, please go ahead.

Ken Hastings

Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR's Director of IR. And joining me this morning are Ron Armstrong, CEO; Harrie Schippers, President and CFO; and Michael Barkley, SVP and Controller.

As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode.(Forward-Looking Cautionary Statements) I would now like to introduce Ron Armstrong.

Ron Armstrong

Good morning. PACCAR reported record revenues and strong operating results for the first quarter of 2018. PACCAR's first quarter sales and financial services revenues were $5.65 billion and first quarter net income was $512 million, a 9.1% after tax return on revenues.

Revenues were 33% higher and net income was 65% higher compared to the first quarter last year. PACCAR Parts achieved record quarterly pre-tax profits of $192 million. PACCAR achieved excellent Truck, Parts and Other gross margins of 14.8% helped by strong global truck and aftermarket parts demand.

First quarter margin is benefited from a favorable customer mix and increased seasonal demand for proprietary parts in the aftermarket. I'm very proud of our 26,000 employees who have delivered industry-leading products and services to our customers worldwide. PACCAR delivered a record 44,500 trucks during the first quarter.

US and Canada Class 8 industry truck orders averaged 42,000 units per month in the first quarter and have exceeded 30,000 units per month for the last six months. DAF above 16-tonne orders increased 41% in the first quarter compared to the same period last year. Due to the robust orders, we expect to deliver 7% to 9% more trucks in the second quarter of this year compared to the first quarter.

Second quarter gross margins for truck will be similar to the first quarter of around 12%. Parts margins will reflect increased sales of TRP and routine maintenance parts. Total Truck, Parts and Other gross margins will again be strong at the mid 14% level. The US economy growth is driving record freight tonnage.

Customers are operating at high utilization levels and are expanding their fleets. We've raised our estimate of US and Canadian Class 8 truck industry retail sales to a range of 265,000 to 285,000 vehicles this year. PACCAR's forecast for the European above 16-tonne market has been increased to a range of 300,000 to 320,000 units, reflecting the strong freight transport activity and truck demand as well as the steady economic outlook.

The new DAF CF and XF, which won the International Truck of the Year are seeing strong demand, achieving a 16.4% share of the European heavy truck market registrations in the first quarter.