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

Zacks Equity Research
Updated

PACCAR Inc. PCAR is scheduled to report fourth-quarter and fiscal 2017 earnings results before the market opens on Jan 30. Last quarter, the company delivered a positive earnings surprise of 4.6%. Per its earnings trend, the company beat estimates in three of the trailing four quarters, missing in only one with an average beat of 1.48%.

The company’s long-term EPS growth in the next 3-5 years is pegged at 10%.

Shares of PACCAR have outperformed the industry it belongs to in the last three months. The stock has gained 9.9% compared with the industry’s growth of 0.4% during the period.

PACCAR Inc. Price and EPS Surprise

PACCAR Inc. Price and EPS Surprise | PACCAR Inc. Quote

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Let’s see how things are shaping up for this announcement.

Factors Influencing This Quarter

For 2017, the company raised the Class 8 industry retail sales estimates in the United States and Canada to the range of 210,000-220,000 compared with the previous expectation of 200,000-220,000 vehicles. This rise in prediction is on the back of economic growth, increased freight activity and low fuel prices.

Further, for 2018, the company projects the Class 8 truck industry retail sales forecasts for the United States and Canada within the band of 220,000-250,000 vehicles.

Also, the company is well-placed in its key markets owing to strategic investments and a strong balance sheet. For fiscal 2017, it expects capital investments of $400-$450 million and research and development expenses of $260-$270 million. Further, for fiscal 2018, it anticipates a capital investment of $425-$475 million while research and development expenses are estimated at $270-$300 million.

PACCAR also follows active capital deployment strategies to enhance shareholder value. In December 2017, it had announced an extra cash dividend of $1.2 per share to its shareholders of record, paid on Jan 4, 2018. Besides, the company will be paying regular quarterly dividend of 25 cents on Mar 6, 2018.

Earnings Whispers

Our proven model does not conclusively show that PACCAR is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: PACCAR has an Earnings ESP of -2.97% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.09 and $1.12, respectively.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: PACCAR carries a Zacks Rank #3, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise. Hence, this combination leaves surprise prediction inconclusive.

We caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are a few auto stocks worth considering from the same space as these have the right combination of elements to come up with an earnings beat this time around:

BorgWarner, Inc. BWA has an Earnings ESP of +0.66% and a Zacks Rank of 3. The company’s fourth-quarter 2017 financial results are expected to be released on Feb 8. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tenneco Inc. TEN has an Earnings ESP of +7.03% and is a Zacks #3 Ranked player. The company will report fourth-quarter 2017 financial results on Feb 9.

Genuine Parts Company GPC has an Earnings ESP of +4.83% and is a #3 Ranked player. The company’s fourth-quarter 2017 financial results are expected to be announced on Feb 20.

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PACCAR Inc. (PCAR) : Free Stock Analysis Report
 
BorgWarner Inc. (BWA) : Free Stock Analysis Report
 
Tenneco Inc. (TEN) : Free Stock Analysis Report
 
Genuine Parts Company (GPC) : Free Stock Analysis Report
 
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Zacks Investment Research