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Is a Beat in Store for PACCAR (PCAR) This Earnings Season?

Zacks Equity Research

PACCAR Inc. PCAR is set to release fourth-quarter 2019 results on Jan 28, before the opening bell. The Zacks Consensus Estimate for the quarter is a profit of $1.51 a share on revenues of $5.55 billion.

This leading manufacturer of heavy-duty trucks posted better-than-anticipated results in the last reported quarter backed by record truck delivery and solid after-market part sales. The company surpassed the Zacks Consensus Estimate in three out of the trailing four quarters, the average beat being 5.13%. This is depicted in the graph below:

PACCAR Inc. Price and Consensus

PACCAR Inc. Price and Consensus

PACCAR Inc. price-consensus-chart | PACCAR Inc. Quote

Which Way are the Estimates Headed?

The Zacks Consensus Estimate for the fourth-quarter earnings per share (EPS) has been unrevised over the past 30 days at $1.51. However, the EPS reflects a year-over-year decline of 8.48%. The Zacks Consensus Estimate for revenues is pegged at $5.55 billion, suggesting a fall from the prior-year quarter’s $5.93 billion.

What the Zacks Model Says?

Our proven model predicts an earnings beat for PACCAR this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: PACCAR has an Earnings ESP of +0.78%. This is because the Most Accurate estimate of $1.52 comes in a cent higher than the Zacks Consensus Estimate.

Zacks Rank: PACCAR carries a Zacks Rank of 2, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Factors Setting the Tone

PACCAR’s impressive line-up of innovative truck models and technologies is likely to have aided the firm’s fourth-quarter performance. Stellar economy and freight growth are likely to have spurred demand for PACCAR’s Class 8 truck during the quarter. The fourth-quarter gross margins for Truck, Parts and Other are expected in the 14-14.5% range compared with the year-ago quarter’s 14.23%.

However, rising commodity prices amid tariff woes, along with material and labor costs due to supply constraints, might have eroded PACCAR’s margin growth in the December-end quarter. Further, rising selling, general and administrative expenses are expected to have hurt the company, clipping profit margins during the period under consideration.

Other Stocks to Consider

Here are some other companies, which according to our model also have the right combination of elements to post earnings beat in the fourth quarter.

Tesla, Inc. TSLA has an Earnings ESP of +3.34% and currently carries a Zacks Rank of 2. The company is slated to release fourth-quarter 2019 earnings on Jan 29.

Lear Corporation LEA is set to report quarterly figures on Jan 28. The company has an Earnings ESP of +10.04% and carries a Zacks Rank #2, at present.

Gentherm Inc THRM is scheduled to release its earnings numbers on Feb 20. The stock has an Earnings ESP of +15.70% and sports a Zacks Rank #1.

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