Yahoo Finance PACCAR Inc (NASDAQ:PCAR) Q4 2023 Earnings Call Transcript
PACCAR Inc (NASDAQ:PCAR) Q4 2023 Earnings Call Transcript January 23, 2024
PACCAR Inc beats earnings expectations. Reported EPS is $2.7, expectations were $2.2. PCAR isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good morning and welcome to PACCAR’s Fourth Quarter 2023 Earnings Conference Call. All lines will be in a listen-only mode until the question-and-answer session. Today’s call is being recorded and if anyone has any objection, they should disconnect at this time. I would now like to hand the call over to Mr. Ken Hastings, PACCAR’s Director of Investor Relations. Mr. Hastings, please go ahead.
Ken Hastings: Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR’s Director of Investor Relations. And joining me this morning are Preston Feight, Chief Executive Officer; Harrie Schippers, President and Chief Financial Officer; and Brice Poplawski, Vice President and Controller. As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties, including general economic and competitive conditions that may affect expected results. For additional information, please see our SEC filings and the Investor Relations' page of PACCAR. I would now like to introduce Preston Feight.
Preston Feight: Hey. Good morning. Harrie, Bryce, Ken and I will update you on a record fourth quarter and full year 2023 results as well as other business highlights. PACCAR's outstanding employees delivered the excellent results by providing our customers with the highest quality trucks and transportation solutions in the industry. In 2023, PACCAR achieved annual revenues of $35.1 billion, net income of $4.6 billion, and an after-tax return on revenue of 13.1%. All three were records. PACCAR's strong financial performance benefited from record deliveries of DAF, Kenworth, and Peterbilt's innovative trucks, record results in our parts division, and strong financial services performance. PACCAR shareholders and customers benefited from the $7.8 billion invested over the past 10 years in new products, world-class facilities, and state-of-the-art technologies.
PACCAR achieved 85 consecutive years of net income and has paid a dividend every year since 1941. In 2023, PACCAR declared a record $4.24 per share in dividends, including an extra cash dividend of $3.20 per share. PACCAR's fourth quarter revenues were $9 billion. Quarterly net income was a record $1.42 billion, which was 54% higher than the prior year. Fourth quarter net income included a $120 million tax provision release in Brazil. PACCAR Parts achieved fourth quarter revenues of $1.61 billion and pre-tax profits of $432 million. In the fourth quarter of 2023, PACCAR delivered 51,000 trucks and for the first quarter of 2024, deliveries are forecast to be around 48,000. Last year, US and Canadian Class 8 truck retail sales were 297,000 units.
Kenworth and Peterbilt's full year deliveries increased from 96,000 to 109,000. In 2024, the US economy is projected to expand within the truck sector, the vocational less than truckload and medium-duty segments are experiencing strong demand and customers are benefiting from the superior performance of new Kenworth and Peterbilt truck models. The 2024 US and Canadian Class 8 truck market is forecast to be in a range of 260,000 to 300,000 vehicles. European above 16-tonne truck registrations were 343,000 last year. DAF's 2023 European deliveries increased to a record 63,000 trucks. DAF's customers appreciate the industry-leading fuel efficiency and driver comfort of DAF's premium trucks. These trucks have a unique competitive advantage in the European market due to an innovative aerodynamic design that features the largest and most luxurious cab interior.
In 2024, the European economy is forecast to grow modestly. We expect the above 16-tonne truck registrations to be in the range of 260,000 to 300,000. Last year, the South American above 16-tonne truck market was 110,000 vehicles and is expected to be similar this year. In Brazil, DAF achieved a record 10.2% share, up from 6.9% last year. DAF Brazil makes a growing contribution to PACCAR's global success. PACCAR full year truck parts and other gross margins were 19.3% and were 19.4% in the fourth quarter, reflecting strong truck deliveries and excellent parts business. We estimate PACCAR's worldwide first quarter truck and parts gross margins to remain strong and be in the range of 18.5% to 19%. 2023 was another great year for PACCAR with many highlights, including revenue and net income records.
PACCAR announced a joint venture to manufacture commercial vehicle batteries. DAF opened a new electric truck assembly plant and earned the Green Truck award as the most fuel-efficient truck in Europe. PACCAR Parts celebrated its 50th anniversary and Kenworth celebrated its 100-year anniversary. We're looking forward to 2024 being another excellent year. Harrie Schippers will now provide an update on PACCAR Parts, PACCAR Financial Services and other business highlights. Harrie?
Harrie Schippers: Thank you, Preston. In 2023, PACCAR Parts set new records for revenues and profits. Annual revenues increased by 11% to $6.4 billion, and pretax profit increased by 18% to $1.7 billion. Parts gross margins climbed to 31.9%, up from 30.4% in the prior year. We estimate part sales to grow by 3% to 5% in the first quarter of this year compared to the record first quarter last year. PACCAR Parts' excellent long-term growth reflects the benefits of investments that increase vehicle uptime and convenience for customers. PACCAR's aftermarket parts and connected services businesses provide strong profitability through all phases of the business cycle. PACCAR parts has 18 Parts Distribution Centers or PDCs worldwide and is expanding its global distribution network with the construction of a new PDC in Masbate Germany, which will open later this year.
PACCAR Financial Services achieved a fourth quarter pretax income of $113 million. Annual pretax income was $540 million and portfolio assets increased to $21 billion. The used truck market normalized in 2023. PACCAR continues to experience good sales volumes of its premium used trucks. PACCAR Financial continues to perform well with low past use, the larger portfolio and excellent credit quality. Last year, PACCAR invested $698 million in capital projects and $411 million in research and development. PACCAR's return on invested capital increased to an industry-leading 38%. In 2024, we're planning capital investments in the range of $700 million to $750 million, and R&D expenses in the range of $460 million to $500 million, as we continue to invest in key technology and innovation projects.
These include next-generation clean conversion engines, battery and hydrogen electric powertrains, advanced driver assistance systems and new connected vehicle services PACCAR is also investing in additional manufacturing capacity. To support future growth, including truck factory expansions at PACCAR Mexico and Kenworth Chillicothe, Ohio, a new engine remanufacturing facility in Columbus, Mississippi, and remissions battery cell factory joint venture. We're excited about the new Peterbilt Model 589, which began production this month. PACCAR's independent Kenworth, Peterbilt and DAF dealers continue to invest in their businesses, enhancing our industry-leading distribution network and making a significant contribution to PACCAR's long-term success.
PACCAR had an outstanding year in 2023 and this year it's off to a very good start. Thank you. We'd be pleased to answer your questions.
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