What's In The Offing For PACCAR (PCAR) This Earnings Season?

PACCAR Inc. (NASDAQ:PCAR) is scheduled to release second-quarter 2019 financial results on Jul 23, before market open. In the last reported quarter, the company delivered a positive earnings surprise of 9.04%. In fact, it surpassed estimates in each of the trailing four quarters, at an average of 7.17%.

In the past three months, shares of the automotive company have underperformed the industry it belongs to. The stock has declined 2.8% against the industry’s 0.4% growth.

Let’s discuss the factors that are likely to make an impact on the upcoming quarterly announcement.

Factors to Influence Q2

The company witnesses consistent rise in demand for Class 8 truck in the United States and Canada, which is likely to drive its second-quarter results. A robust economy along with strong freight demand is boosting PACCAR’s truck retail sales. This has led to higher transport activity.

Moreover, the company’s engagement in manufacturing and development of products enables it to sustain a salient position in the key markets. The company’s efforts to expand its global distribution network are evident through the Trailer Parts Program (TRP).

It should be noted that there are several headwinds that can affect the results.

The company is facing decline in prices of used trucks due to intemperate supply. High labour and material costs along with rising commodity prices are adding to its woes. Also, exorbitant costs are likely to exert pressure on the company’s margin.

Additionally, stiff competition from industry peers in the commercial truck market will likely dent second-quarter results.

What the Zacks Model Says

Our proven model does not conclusively show that the company is likely to beat earnings estimates in the quarter to be reported. This is because a stock needs to have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here as you will see below:

Earnings ESP: PACCAR has an Earnings ESP of -0.90%. The Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $1.80 and $1.82, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: The company currently carries a Zacks Rank #3. However, a negative Earnings ESP makes surprise prediction difficult.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is witnessing negative estimate revisions.

Stocks to Consider

Here are some auto stocks worth considering, which have the right combination of elements to deliver an earnings beat this time around:

Group 1 Automotive, Inc (NYSE:GPI) has an Earnings ESP of +0.73% and carries a Zacks Rank #3. It is slated to release second-quarter 2019 results on Jul 25. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cummins Inc (NYSE:CMI) has an Earnings ESP of +3.67% and currently carries a Zacks Rank of 3. It is slated to release second-quarter 2019 results on Jul 30.

Penske Automotive Group, Inc (NYSE:PAG) has an Earnings ESP of +0.42% and currently carries a Zacks Rank of 3. The company is slated to release second-quarter 2019 results on Jul 30.

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