Positive portfolio quality, heightened used truck sales, and product launches led to growth in Paccar Financial Services’ revenue and portfolio in the third quarter.
Paccar Financial (PFS), the financing arm of truck manufacturer Paccar, reported revenue of $464.1 million in Q3, up 24.8% year over year. Total assets in its financing portfolio were $19.6 billion, up 22.9% YoY, with the company’s 30-day delinquencies at 0.8%, according to the company’s earnings presentation.
Product launches helped PFS continue to grow its portfolio despite higher interest rates, Paccar President and Chief Financial Officer Harrie Schippers said during Tuesday’s earnings call.
“The portfolio quality continues to be strong,” he said. “Higher interest rates drive higher payments for our customers, but with all the new products that we launch that have better fuel efficiency, they see savings on the fuel bill that more than offset the higher interest payments in today’s environment.”
The company’s financed portfolio is made up of 225,000 trucks and trailers, including a fleet of 43,000 vehicles from PacLease, the company’s North American and European truck leasing subsidiary, according to the release. Meanwhile, Paccar Financial’s provisions for losses on receivables increased to $6.2 million in the quarter, compared with an $800,000 gain in Q3 2022.
“Credit losses were $6 million in the quarter, but that’s a small number to the almost $20 billion portfolio,” Schippers said. “We expect the finance company to continue to do well.”
Demand, strong market drive sales
Bellevue, Wash.-based Paccar, manufacturer of Kenworth, Peterbilt and DAF trucks, delivered 50,100 vehicles worldwide in Q3, up 12.8% YoY, according to the presentation. Paccar truck sales totaled $6.6 billion in Q3, up 28% YoY. The company held 28.4% of heavy-duty truck market share in the United States and Canada.
“Paccar’s global investments in innovative new DAF, Kenworth and Peterbilt trucks, as well as investments in technology and manufacturing, were key elements in delivering strong performance,” Chief Executive Preston Feight said during the earnings call.
U.S. and Canada Class 8 truck industry retail sales are estimated between 295,000 and 315,000 trucks in 2023, according to Paccar’s earnings release. U.S. and Canada Class 8 trucks industry sales for 2024 are projected to be between 260,000 and 300,000 vehicles, Feight said.
“Demand is strong for Kenworth and Peterbilt trucks, with the first quarter of 2024 filling in quickly,” he said.
Shares of Paccar Inc. [Nasdaq: PCAR] were trading at $84.53 at market close today, down 0.35% or 35 cents from market open. Paccar has a market capitalization of $44.35 billion.
