Overseas sales, finance business carry Paccar beyond forecast

Sales of heavy-duty trucks in the United States may be decelerating like a big rig climbing a steep mountain pass, but that didn't seem to faze Bellevue-based Paccar.

After riding a surge in U.S. truck sales to record profits last year, Paccar relied on overseas sales and its growing finance business to beat Wall Street's first-quarter profit estimates.

The truckmaker, whose nameplates include Peterbilt and Kenworth domestically and DAF in Europe, racked up $365.6 million in profit last quarter, or $1.46 per share. That far surpassed the consensus forecast of $1.20 a share, as compiled by Thomson One Analytics.

Traders liked what they saw. Paccar shares gained $7.77, or 9.86 percent, in heavy Nasdaq trading Tuesday; they touched an all-time high of $90.70 a share before finishing the day at $86.56. More than 7.3 million shares changed hands, quadruple the three-month average trading volume.

Both the United States and the European Union have been tightening emissions standards for truck engines. In the United States, that had the effect of "pulling forward" sales into 2006 as fleet owners tried to beat the new rules.

In Western Europe, by contrast, national governments have subsidized the cost of implementing the emissions rules, Paccar Chief Executive Mark Pigott said during a conference call with analysts.

"So they are able to smooth out that transition, whereas in the U.S. and Canada, there were no incentives and it was just the capitalistic markets at work," Pigott said.

In addition, truck sales often track growth in the overall economy, and Europe's economy is expected to outperform the United States'. The International Monetary Fund (IMF) forecasts Eurozone growth this year of 2.3 percent, down slightly from 2.6 percent last year. U.S. growth, by contrast, is forecast to slow to 2.2 percent from last year's 3.3 percent.

The upshot was that, while Paccar's U.S. revenue fell 14.8 percent from the fourth quarter of 2006 to the first quarter of 2007, its revenue from Europe grew by 14.5 percent. Europe accounted for nearly 35 percent of Paccar's total revenue in the first quarter, versus 28.7 percent in the fourth quarter of 2006.

Paccar also raised its outlook for industrywide heavy-duty truck sales in Europe this year, to 265,000-280,000 units, from the 250,000-270,000 forecast in the fourth quarter. But the company trimmed its North American forecast, to 190,000-220,000 units from 200,000-230,000.

"We are four months into the year, [and] we are just getting that much smarter," Pigott said in the teleconference.

The quarterly results were also boosted by Paccar's finance and leasing business, which posted $65.6 million in pretax profit compared with $54.8 million in the first quarter of 2006 — a 19.7 percent increase.

Paccar said it had raised its quarterly dividend from 20 cents per share to 25 cents. The higher dividend will be paid June 5 to shareholders of record on May 18.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com