Shares of PACCAR (NASDAQ:PCAR) jumped 13.7% in July, according to data provided by S&P Global Market Intelligence, with nearly all of those gains accumulating in the latter half of the month after the truck maker released its second-quarter earnings report. While the numbers were abysmal as the COVID-19 pandemic hit operations of nearly every industrial company, PACCAR gained market share and gave hints of a recovery in end-market demand.
More importantly, PACCAR revealed plans about electric vehicles -- the red-hot topic right now.
The North American Class 8 heavy-duty truck market saw a sharp rebound in the number of orders in the month of June backed by low fuel costs and higher freight activity, fueling investor optimism about PACCAR'S prospects ahead of earnings. The company didn't disappoint on that front: CEO Preston Feight revealed that PACCAR's backlog is full through the third quarter and orders are now stretching into the fourth quarter and even next year.
PACCAR's flagship brands, Peterbilt and Kenworth's, gained market share of 29.6% in the North American Class 8 retail truck market in Q2, up five basis points year over year.
PACCAR, otherwise, reported a 54% drop in sales and a staggering 76% slump in net income in Q2, both year over year. The numbers were still better than analysts' estimates, and the company also ended the quarter with strong liquidity and cash from operations.
All eyes, however, were on PACCAR's electric-vehicle plans, especially after the recent hype created by companies like Tesla and early-stage manufacturer Nikola that are going all out to make electric vehicles a reality. PACCAR is a traditional truck maker, and investors have been watching the company closely to track what headway it's making into the electric vehicle space to stay competitive.
During its second-quarter earnings release, PACCAR said it expects to begin production of battery-operated electric trucks in 2021. Kenworth is also delivering 10 hydrogen-fuel cell trucks to customers for field testing. PACCAR revealed it has, so far, delivered 60 "battery electric, hybrid, and hydrogen-powered trucks" for field testing.
The coronavirus outbreak and lockdowns dealt a huge blow to the freight markets, but orders for heavy-duty trucks appear to be recovering faster than expected. After a strong June, Class 8 truck orders are up 28% sequentially, registering their strongest month since October 2019 in terms of units, according to preliminary industry reports.
This bodes well for PACCAR, which is already gearing up for higher production in the third quarter backed by improving customer demand and order intake.