PACCAR Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. PACCAR designs and manufactures Kenworth, Peterbilt and DAF trucks, distributes aftermarket parts, and provides vehicle financing and leasing. Figures below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Financial performance
| Metric | Q1 2024 | Q1 2023 | Change / context |
|---|---|---|---|
| Worldwide sales and revenues | $8,744.3 | $8,473.3 | Up 3.2% |
| Net income | $1,195.3 | $733.9 | Up 62.9%; comparison affected by prior-year litigation charge |
| Diluted EPS | $2.27 | $1.40 | 2023 adjusted EPS was $2.25 |
| Income before taxes | $1,534.5 | $919.0 | 2023 included the $600.0 European claims charge |
| After-tax return on revenues | 13.7% | 8.7% | 2023 adjusted measure was 13.9% |
| Operating cash flow | $1,469.0 | $684.8 | Up $784.2 |
| Cash and marketable securities | $8,025.9 | $9,004.3 at Dec. 31, 2023 | Down $978.4 |
Revenue and earnings comparison: excluding the $446.4 after-tax European claims charge in Q1 2023, prior-year adjusted net income was $1,180.3 million, or $2.25 per diluted share. On that basis, Q1 2024 net income was modestly higher. Adjusted figures are non-GAAP measures disclosed by the company.
Segments and margins
- Truck: Revenue was $6,541.0 million, up 2%; pretax income was $881.6 million versus $894.3 million. Pretax return on revenue was 13.5% versus 13.9%, and gross margin was 15.6% versus 16.2%. Higher prices and North American deliveries partly offset fewer deliveries in Europe and higher material and labor costs.
- Parts: Revenue was $1,675.9 million, up 3%; pretax income was $455.8 million, up 4%. Pretax return on revenue was 27.2% versus 27.0%, and gross margin was 32.5% versus 32.2%.
- Financial Services: Revenue increased 20% to $509.3 million, but pretax income declined 23% to $113.9 million. Higher interest income and portfolio growth were offset by lower operating-lease margins, weaker returned-vehicle results, and higher credit-loss provisions.
Cash, liquidity and debt
- Cash and cash equivalents were $6,194.5 million at March 31, 2024; marketable securities were $1,831.4 million. Combined cash and securities were $8,025.9 million.
- Operating cash flow was $1,469.0 million; investing cash outflow was $526.1 million; financing cash outflow was $1,880.0 million. Cash declined by $987.2 million during the quarter, principally reflecting $1,816.5 million of dividends paid and net borrowing activity.
- Financial Services liabilities included $4,914.8 million of commercial paper and bank loans and $9,114.9 million of term notes. PACCAR issued $950.0 million in medium-term notes during the quarter to support business volume and repay maturing debt.
- Credit line arrangements totaled $4.12 billion, of which $3.63 billion was unused. The company reported investment-grade ratings of A+/A1 and stated that available liquidity and capital-market access should support its funding needs.
- Capital investments were $164.3 million; R&D expense was $105.5 million, compared with $132.9 million and $97.2 million, respectively, in Q1 2023.
Material changes, outlook and risks
- Worldwide truck deliveries declined 6% to 48,100 units: North America rose 13% to 29,500, while Europe declined 33% to 11,600. North American heavy-duty market share increased to 30.3% from 27.0%; DAF’s European over-16-tonne share fell to 13.4% from 16.1%.
- Financial Services’ provision for receivable losses increased to $16.1 million from $3.1 million. Net charge-offs were $8.6 million versus $1.9 million; worldwide retail accounts 30+ days past due rose to 1.2% from 0.5% a year earlier. Management cited portfolio growth, more past-due accounts in Europe, higher charge-offs and lower used-truck values. Used-truck losses excluding repossessions were $10.9 million, compared with gains of $27.8 million in Q1 2023.
- 2024 outlook: U.S. and Canada heavy-duty retail sales of 250,000–290,000 units; European over-16-tonne registrations of 260,000–300,000; and South American heavy-duty registrations of 105,000–115,000. PACCAR Parts sales are expected to increase 4%–8%; Financial Services average earning assets are expected to increase 3%–5%. Capital investments are forecast at $700–$750 million and R&D at $460–$500 million.
- PACCAR expects construction of its battery-cell joint venture’s 21 GWh Mississippi factory to begin in Q2 2024, with production targeted for 2027; its anticipated investment is $600–$900 million over several years. A new parts distribution center in Germany is expected to open in 2024.
- European Commission-related truck-industry claims remain in litigation. PACCAR recorded a $600.0 million pretax charge in Q1 2023 based on estimated total costs; the estimate may change as proceedings continue, potentially materially affecting results. Management says it believes it has meritorious defenses.
- Other stated risks include weaker truck demand or freight conditions, used-truck price declines, higher interest rates, currency and commodity movements, supplier or labor disruption, regulation, cybersecurity, and reduced capital-market access. The company warned that weaker freight conditions could increase delinquencies, repossessions and credit losses and reduce new financing volume.
- Management reported no material change in risk factors or market risk during the quarter and concluded disclosure controls were effective.
Important facts for investors to verify
- Track truck demand, deliveries and market share—especially the contrast between stronger North American deliveries and weaker European volumes.
- Assess whether Financial Services delinquencies, modifications, provisions and used-truck losses continue to rise, and whether lease margins recover.
- Monitor European claims outcomes and any revisions to the $600.0 million prior-year litigation estimate.
- Compare cash generation and planned investment with dividends, debt maturities and the availability or renewal of credit facilities.
- Check actual 2024 results against the company’s truck-market, parts-growth, Financial Services asset-growth, capital-investment and R&D outlook.