PACCAR Inc (PCAR), Cummins Inc. (CMI): A Bad Earnings Report Could Slam the Brakes on This Stock’s Rally

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As one of Cummins Inc. (NYSE:CMI)’ prominent customers, PACCAR is one of the first to adopt Cummins Inc. (NYSE:CMI)-Westport Innovations Inc. (USA) (NASDAQ:WPRT) engines for its truck models. So any rise in Westport Innovations Inc. (USA) (NASDAQ:WPRT)’s engine shipments means increasing demand for natural-gas vehicles, which bodes well for PACCAR.

The last quarter, though, was a soft one, with Westport Innovations Inc. (USA) (NASDAQ:WPRT) reporting a 32% dip year over year in shipments of Cummins Inc. (NYSE:CMI)-Westport Innovations Inc. (USA) (NASDAQ:WPRT) engines, as demand from international markets slowed down. But PACCAR investors should focus on the long-term prospects of natural-gas trucks, which look promising.

In PACCAR’s upcoming earnings call, investors should also look for the company’s plans, if any, to expand into China. With Westport Innovations Inc. (USA) (NASDAQ:WPRT)’s last-quarter engine sales to China more than tripling year over year, the world’s most populous country could well be the next hot spot for natural-gas vehicles. PACCAR has already made its way into Brazil, with production at its new DAF trucks plant scheduled to begin later this year. The company should update the progress of the project next week.

DAF trucks are otherwise doing well in Europe, with orders rising 29% year over year during PACCAR’s first quarter. If the order book continues to grow during the second quarter, it could help PACCAR offset weakness in some of the other markets.

The article A Bad Earnings Report Could Slam the Brakes on This Stock’s Rally originally appeared on Fool.com is written by Neha Chamaria.

Fool contributor Neha Chamaria has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Cummins, PACCAR, and Westport Innovations.

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