Paccar says worst of COVID-19 economic damage over after 58% revenue drop

Dive Brief:

Paccar reported a 58% drop in revenue as truck production was shut down for five weeks during the COVID-19 pandemic, but the OEM managed to post a net profit of $148 million, according to the company's latest earnings report.
The company had cash and marketable securities of $4.17 billion for the quarter ended on June 30, with another $3 billion in credit. Paccar, which owns the Peterbilt, DAF and Kenworth brands, delivered 18,100 trucks in the second quarter. CEO Preston Feight said Paccar Parts, a key cash-earner for the company, earned $824 million in revenue, generating pre-tax profits of $152 million. That is down 19.7% from $1.03 billion in Q2 2019.
Feight sounded an optimistic note throughout the call, telling investors that "customers realize the benefits of low fuel costs, and in many sectors experienced growing freight volumes and increased pricing as the quarter progressed."

Dive Insight:

Clearly, the pandemic took its toll, as Paccar's Q2 2019 revenues had been $6.27 billion. But the worst of the COVID-19 pandemic's economic damage seemed to be in the rearview mirror, at least for Paccar, if Feight's remarks were any indication. Feight and other Paccar executives talked up their sales and profits, and took time to update investors and analysts on their efforts to grow into the electric truck and fuel-cell electric vehicle markets.

Paccar estimated OEMs will sell between 160,000 and 190,000 Class 8 tractors in the United States and Canada for the remainder of 2020. Class 8 orders are trending upward, according to ACT Research's latest monthly report, with 16,010 net orders in June, up 139.3% from 6,690 units in May.

However, there is opportunity for Paccar in other aspects of the business. Paccar Parts, which posted a record-setting Q1, began to show recovery in June, company officials said. And it's a division the company hopes to see do better in the second half of 2020.

"As trucks move, parts move," Feight said. "We've seen good truck movement so we anticipate good parts movement." In addition to new parts stores in Las Vegas and Brazil, Feight said, Paccar has launched an e-commerce platform to help carriers get parts the same day or the next day.

Feight said the parts business has been a mixture of dealers and fleets. Customer mix was also diverse for buyers of new trucks, and not just core truckload fleets.

"It's pretty broad," said Feight. "It's some of the bigger customers in the various sectors that are continuing to use trucks, that will need to replace trucks, and they might have postponed a buy for a quarter and now they are ordering."

Medium-duty truck orders were particularly doing well, Feight said.

Feight said Peterbilt and Kenworth saw Class 8 market share in the U.S. and Canada tick up to 29.6%, for the first half of the year, up from 29.1% during the comparable period in 2019. For Q2, Paccar delivered 9,300 trucks in the U.S. and Canada, compared to 30,000 in Q2 2020. It delivered 8,800 trucks in Europe and elsewhere in Q2, compared to 22,300 for the comparable period a year before.