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PACCAR's Smart Moves Should Push Revenue Higher

With the unveiling of the new "next generation" truck models at the Mid-America Trucking Show in Louisville, Ky., last week, truck maker PACCAR (Nasdaq: PCAR  ) looks set for bigger things. Nearly four years and $400 million went into the two new models launched under its brands Kenworth (with the Model T680) and Peterbilt (with the Model 579).

The best part is that these new trucks are a part of the heavy-duty Class 8 segment, which has been doing extremely well lately. What's more, PACCAR has already bagged an order for 1,000 T680s from Kansas-based TransAm Trucking.

Vrooming ahead
The new trucks are equipped with the company's own fuel-efficient, high-horsepower diesel engines. In addition, the trucks have ergonomic design, luxurious sleeper provisions, and other advanced features. They seem to be a step ahead in quality and should be a great addition to PACCAR's Class 8 product line.

Total U.S. Class 8 truck sales were at 15,418 units in February -- up by a whopping 59% from the comparable period last year -- and marked the 26th consecutive month of year-on-year sales growth. Moreover, sales in the first two months of 2012 have been 56% higher than in the year-ago period. In terms of market share, PACCAR's Kenworth and Peterbilt trucks held the third and fourth positions with 15% and 14%, respectively, after Daimler's 35% and Navistar's (NYSE: NAV  ) 20%.

The share of Peterbilt and Kenworth in the U.S. and Canada Class 8 market hit a record high of 28.1% last year, thanks to higher freight rate and tonnage. These factors actually helped drive PACCAR's fourth-quarter revenue to a historical high of $4.85 billion.

Gassing up
Trucks with superior engineering aren't all PACCAR is focusing on. Last week PACCAR intensified its "green" efforts by introducing natural-gas engines in more of its trucks.

PACCAR already uses engines made by Cummins (NYSE: CMI  ) in collaboration with Westport Innovations (Nasdaq: WPRT  ) , and it's showing greater interest in the alternative fuel. The Kenworth and Peterbilt models exhibited at the show were fitted with the new Cummins Westport heavy-duty ISX12 G engines. Cummins will start full production of these engines, which will duly comply with the fuel efficiency and emission standards, next year.

PACCAR is wisely preparing for opportunities arising from the natural-gas revolution, as peers are in the game, too. Navistar has stepped into the arena by opting for the Cummins Westport engines for its new trucks, and it has announced a partnership with Clean Energy Fuels to help boost the adoption of natural gas as a fuel.

The Foolish bottom line
PACCAR is a solid company, and its new launches and natural gas initiatives definitely deserve a green thumbs-up. It is poised to take advantage of the reviving truck industry. If you'd like to know which natural gas company we think will benefit the most from this alternative fuel, check out our special free report. We'll fill you in on the best way to profit. Get your copy of the report today, absolutely free!

Click here to add PACCAR to your stock watchlist.

Neha Chamaria does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Cummins, Westport Innovations, and PACCAR. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 30, 2012, at 5:02 AM, bourse wrote:

    Great article! It highlights not only the future oriented attitude of Paccar but also the chances investors have in "natural gas innovators" like Westport and Clean Energy Fuels

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