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WIKI ANALYSIS
Paccar (NASDAQ: PCAR) is a U.S.-based truck manufacturer. Paccar makes medium (14,001 to 26,000 lbs) and heavy (over 26,001 lbs) trucks for the North American and European markets under the Kenworth, Peterbilt, Foden, and DAF brands.[1] In Europe, the company makes light trucks (under 8,500 lbs) under the Leyland Trucks brand.[2] The company held 26% of the North American heavy truck market, 14% of the European heavy truck market, and 8% of the European light/medium market.
Since the first half of 2008, a softening U.S. economy resulted in nearly flat consumer spending growth (0.5% and 0.2% for the first and second quarters of 2008, respectively), which means that there is less demand for trucks to transport goods.[3] On the other hand, global demand is fairly healthy and the weak dollar provided Paccar with a $590 million revenue boost.[4] Paccar's trucks compete with brands such as Mack Trucks, International Trucks, and Daimler Trucks.
Company Overview
Business Financials
In 2009, PCAR earned a total of $7.1 billion in total revenues. This was an alarming decline from its 2008 total revenues of $15.0 billion. Unsurprisingly, this had a dramatic adverse effect on PCAR's net income. Between 2008 and 2009, PCAR's net income declined from $1.0 billion in 2008 to $112 million in 2009.
Business Segments
Trucks
The segment designs and manufactures medium- and heavy-duty trucks under the Kenworth, Peterbilt, and DAF brands for the North American and European markets. The company also produces light/medium-duty trucks for the European market under the DAF brand. Paccar's trucks compete against trucks produced by AB Volvo (VOLVY), Daimler AG (DAI), and Navistar International (NAV). In North America, the company's share of the heavy-duty truck market was 26%. In Europe, the company held 14% of the heavy-duty truck market and 8% of the light/medium market.[5]
In addition to the trucks themselves, the Trucks segment also makes aftermarket parts, which are distributed through independent dealers. The trucks are essentially custom products and, with the exception of the DAF brand in Europe, customers choose up to 90% of the truck's components such as engines, axles, and transmissions.[6]
Financial Services
This segment provides financing to the independent dealers that sell Paccar's trucks. It also provides leasing and retail financing to end purchasers of the company's trucks.[7]
Other
The Other segment manufactures industrial winches and markets them under the Braden, Carco, and Gearmatic brand names.
Key Trends and Forces
Government regulation creates cyclical demand in the commercial truck market
The EPA emissions standards that came into effect on January 1, 2007 increased the price of an average new heavy truck by $7,500.[8] When new government emissions standards are introduced, the average price of a new truck usually increases as manufacturers spend more money on technology and research so that their vehicles meet the new emissions requirements. Because the new emissions standards only affect trucks manufactured after they come into effect, truckers do not need to update older trucks. As a result of the costs associated with buying trucks manufactured after emissions standards come into effect, truckers have an incentive to rush new truck purchases before the new standards come out. By the same token, truckers also tend to hold off on new truck purchases after the standards come out. This increase in truck prices combined, with a softening US economy, can lead PCAR to have unstable revenue and earning streams.
The demand for the goods transported by truckers influences the demand for trucks
When spending on all goods decreases, businesses don't need as many trucks to transport goods, resulting in lower revenues for Paccar. The slowdown in consumer spending growth, combined with new EPA regulations has hurt PCAR's revenues and earnings.
On the other hand, when consumers spend more money and the demand for goods increases, businesses need trucks to transport goods and keep their shelves stocked, boosting Paccar's sales.
Key Competitors
Paccar's key competitors are:
- Daimler AG (DAI) - Daimler AG is a German manufacturer of cars, trucks, vans, buses, and other automobiles. Its light and heavy trucks compete with Paccar's models in Europe.[9]
- AB Volvo (VOLVY) - Volvo is a Swedish manufacturer of trucks, buses, and construction equipment, as well as marine and aircraft engines. Its Mack Trucks line competes with Paccar in North America and its Renault and Volvo Trucks brands in Europe.[10]
- Navistar International (NAV) - Navistar is a U.S. company whose trucks compete with Paccar under the International Trucks and MaxxForce brands in North America. Navistar also manufactures engines and aftermarket parts for trucks.[11]
References
- ↑ PCAR 10-K 2009 Item 1 Pg. 2
- ↑ 40CFR86.082-2, pg 240
- ↑ USA TODAY survey: We're in recession, economists say
- ↑ PCAR 2007 10-K: EX-13, pg 25
- ↑ PCAR 2007 10-K: Trucks, pg 2-3
- ↑ PCAR 2007 10-K: Trucks, pg 2-3
- ↑ PCAR 2007 10-K: Trucks, pg 4
- ↑ Emissions regs drive truck business.(new emission standards for heavy truck companies)(Brief article)
- ↑ DAI 2007 Annual Report: Statement of Income
- ↑ Google Finance: VOLVY
- ↑ Google Finance: NAV
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