Overseas demand boosts Paccar

Paccar said second-quarter profit rose 5.1 percent as the truck maker's sales in Europe helped overcome lower demand in the U.S.

Net income increased to $313.5 million, or 86 cents a share, from $298.3 million, or 79 cents, a year earlier, the Bellevue company said Tuesday. Sales climbed 11 percent to $4.11 billion.

Paccar's 31 percent increase in European sales more than made up for its 8.3 percent decline in the U.S., where customers have had to contend with tighter credit and surging diesel-fuel prices. Paccar, which makes Kenworth and Peterbilt trucks, got more than 65 percent of its revenue during the quarter from outside the U.S.

"Europe is obviously a great market for them," said J.B. Groh, an analyst at D.A. Davidson & Co. in Lake Oswego, Ore.

Per-share profit beat the 83-cent average of eight analyst estimates compiled by Bloomberg. The better-than-expected results pushed Paccar stock up $1.88, or 4.4 percent, to $44.60. The shares have declined 18 percent this year.

"European truck sales are robust due to the growth in Central Europe as countries invest in infrastructure," Chief Executive Officer Mark Pigott said on a conference call with analysts and investors.

DAF Trucks, Paccar's Dutch-based unit, forecast industrywide sales of heavy-duty trucks in Europe would rise to 350,000 to 360,000 this year, from 340,000 in 2007.

Earlier this month, Paccar said it planned to boost production by 5 percent at DAF, starting in September. European heavy-truck sales rose 10 percent to 146,515 this year through May, the Brussels-based European Automobile Manufacturers Association said June 25.

Paccar lowered its forecast for 2008 industry sales in the U.S. and Canada to a range of 150,000 to 165,000 vehicles, from its previous estimate of 165,000 to 185,000. Demand has slowed, in part because of diesel-fuel costs, which averaged $4.47 a gallon in the second quarter, according to motorist group AAA.

Paccar's finance unit, which includes 169,000 trucks and trailers and $11.1 billion in assets, said second-quarter pretax profit fell to $58.7 million from $68.9 million a year earlier, as credit losses linked to repossessions increased in the U.S. and Canada.

"There has been some modest decline" in the resale value of Paccar trucks," Pigott said. Still, "our products continue to demand a premium."

"We have a lot of confidence in the long-term outlook for the financial-services sector," Chief Financial Officer Ron Armstrong said on the conference call.

Of Paccar's total revenue for all of last year, Europe accounted for 53 percent, as U.S. demand slumped because the housing and auto markets slowed and truckers cut back on purchases after buying ahead of emissions rules that took effect in January 2007.