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What's in the Offing for PACCAR (PCAR) This Earnings Season?

PACCAR Inc. PCAR is slated to release third-quarter 2021 results on Oct 26, before the opening bell. The Zacks Consensus Estimate for the quarter’s earnings and revenues is pegged at $1.29 per share and $4.81 billion, respectively.

The trucking giant delivered better-than-expected earnings in the last reported quarter amid higher-than-anticipated sales in the Parts and Financial Services segment.

Over the trailing four quarters, PACCAR beat earnings estimates on three occasions and missed on the other, with the average surprise being 4.6%. This is depicted in the graph below:

PACCAR Inc. Price and EPS Surprise

PACCAR Inc. price-eps-surprise | PACCAR Inc. Quote

Trend in Estimate Revisions

The Zacks Consensus Estimate for third-quarter 2021 earnings per share has moved south by 3 cents over the past seven days. The bottom-line projection calls for a 16.2% year-over-year surge and an 8.5% sequential decline. The Zacks Consensus Estimate for revenues suggests a 6% increase from the prior-year period and a 10.7% decrease from the last reported quarter.

Factors to Note

PACCAR’s strong reputation for quality and leading brands — Kenworth, Peterbilt, and DAF — as well as rising demand for Class 8 heavy trucks from the year-ago period, thanks to economic growth, are anticipated to have aided third-quarter sales. Consequently, the consensus mark for revenues from the Trucks segment is pegged at $4,082 million, indicating 16.5% year-over-year growth. The consensus estimate for the segment’s pretax profit is $242 million, suggesting an increase from $210 million recorded in the prior-year quarter.

Persistent growth in aftermarket parts — which are less cyclic in nature and carry high margins — is likely to have supported the firm’s quarterly performance. The Zacks Consensus Estimate for revenues from the Parts segment is pegged at $1,202 million, indicating an increase from $1,016 million recorded in the corresponding year-ago period. The consensus mark for pretax profit is $262 million, suggesting growth from the year-ago figure of $210 million.

Nonetheless, the ongoing global chip deficit is expected to have limited the firm’s deliveries and revenues. In fact, PACCAR notified early this month that the shortage of microchips lowered truck deliveries by 7,000 units sequentially. Precisely, the company estimates third-quarter 2021 deliveries to be 33,000 units, indicating a rise from 36,000 reported in the year-ago period but a decline from 40,100 in second-quarter 2021. As such, revenues from Trucks and Parts segments are also likely to witness a decline on a sequential basis.

On top of that, PACCAR is likely to have bore the brunt of rising commodity prices, which would have clipped gross margins. High R&D costs to support investments in innovative products and technology are also anticipated to have dented operating profits to some extent.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for PACCAR for the to-be-reported quarter, as it does not have the right combination of the two key ingredients. A combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: PACCAR has an Earnings ESP of -4.50%. This is because the Most Accurate Estimate is pegged 5 cents below the Zacks Consensus Estimate.

Zacks Rank: It currently carries a Zacks Rank of 3.

Stocks to Consider

Here are a few companies in the auto space that you may want to consider, as our model shows that these have the right combination to post an earnings beat in the upcoming releases:

Penske Automotive PAG has an Earnings ESP of +5.24% and a Zacks Rank #2. The stock is set to report third-quarter 2021 earnings on Oct 27.

Sonic Automotive SAH has an Earnings ESP of +5.83% and a Zacks Rank #2. The stock is set to report third-quarter 2021 earnings on Oct 28.

Group 1 Automotive GPI has an Earnings ESP of +13.35% and a Zacks Rank #2. The stock is set to report third-quarter 2021 earnings on Oct 28.


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Penske Automotive Group, Inc. (PAG): Free Stock Analysis Report
 
PACCAR Inc. (PCAR): Free Stock Analysis Report
 
Group 1 Automotive, Inc. (GPI): Free Stock Analysis Report
 
Sonic Automotive, Inc. (SAH): Free Stock Analysis Report
 
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