July 28, 2009 / 5:22 PM / in 9 years

UPDATE 4-Paccar reports drop in net, cuts industry outlook

* Q2 loss 1 ct/share ex-items; Wall St view EPS 4 cts

* Sales down 55 percent at $1.85 billion

* Says challenging market conditions continuing

* Shares fall as much as 12 percent (Adds comments from conference call, updates shares)

By James B. Kelleher

CHICAGO, July 28 (Reuters) - Paccar Inc (PCAR.O) said on Tuesday that quarterly earnings plunged more than 90 percent as a weak freight market walloped demand for its trucks and forced it to idle some plants.

The company warned that challenging market conditions were continuing, especially in Europe, where it lowered its forecast for 2009 industrywide truck demand and provided an initial glimpse at 2010 that shows sales plunging to levels last seen in 1992.

The news sent its shares down as much as 12 percent.

JPMorgan analyst Ann Duignan called the truck market outlook “sobering.”

Paccar, which makes vehicles under the Peterbilt, Kenworth and DAF brands, reported second-quarter profit of $26.5 million, or 7 cents a share, down from $313.5 million, or 86 cents a share, a year earlier.

Excluding a one-time gain, Paccar reported an operating loss of 1 cent a share. Analysts on average had expected the Bellevue, Washington-based company to report operating earnings of 4 cents per share, according to Reuters Estimates.

Sales fell 55 percent to $1.85 billion.

Paccar forecast industrywide retail sales of the biggest on-highway trucks in the U.S. and Canada at 100,000 to 110,000 vehicles in 2009, “reflecting continued economic weakness, specifically in lower housing starts and auto production.”


Truckmakers had hoped 2009 would be a good one for demand, thanks to tough U.S. clean air rules that take effect in 2010. The regulations, which require more efficient — and more expensive engines — were expected to prompt fleet owners to stock up on cheaper trucks now.

But the recession and credit crunch have effectively killed those hopes. During a conference call to discuss Paccar’s earnings, Mark Pigott, the company’s chief executive, said: “It’s going to be challenging certainly through the end of this year.”

Looking forward to next year, Paccar predicted sales in the United States and Canada would improve slightly and be in the range of 110,000 to 140,000 vehicles.

Industry retail sales in the region peaked at 322,500 units in 2006, ahead of clean-air rules that took effect in 2007 and triggered the sort of “prebuy” truckmakers were counting on this year.

The company cut its estimate for industrywide heavy truck sales in Europe to between 170,000 and 180,000 vehicles, down from its April forecast of 180,000 to 220,000. And next year, it said they could fall again, to as low as 150,000 units.

Pigott said Paccar remains committed to pricing discipline.

But he acknowledged that industrywide prices had fallen over the past two years and that the $8,000 to $10,000 premium most analysts expect will be added to truck prices as a result of the new 2010 regulations would come on top of this year’s lower price levels, not the higher ones that prevailed earlier this decade.

Paccar shares were down $3.72 or 10.5 percent at $31.57 in early afternoon trading after falling as low as $30.97. (Reporting by James B. Kelleher, editing by Gerald E. McCormick and Lisa Von Ahn)

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