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Transportation Company Earnings Summary 2Q 2021
**Key Takeaways**
Truck demand is currently at an all-time high, driven by a strong global economy and increased freight activity. Many manufacturers have filled their order books through the rest of 2021, with some even looking ahead to 2022. However, new truck production schedules are becoming less predictable due to ongoing supply chain disruptions.
The semiconductor shortage remains the biggest obstacle, and there's still no clear timeline for when this issue will be resolved. Additionally, rising costs for raw materials like steel and copper are putting pressure on profit margins. To counter these challenges, many manufacturers have raised prices for the 2022 model year.
Most truck companies report that demand is robust, fueled by a quick recovery from the pandemic. However, they also face critical shortages in parts, especially semiconductors, as component suppliers struggle to keep up with demand across multiple industries. Experts believe the chip shortage could last well into 2022, which may affect production schedules.
Higher input costs are another major concern, prompting manufacturers to increase prices to maintain profitability. This trend is expected to continue as inflationary pressures remain high.
Below are key takeaways from truck manufacturers' second-quarter 2021 earnings reports.
**Company Outlooks**
| Company | Outlook | Date |
|-------------|--------------|------------|
| Meritor | Positive | 8/4/2021 |
| Cummins | Positive | 8/3/2021 |
| Paccar | Neutral | 7/27/2021 |
| Daimler | Neutral | 7/21/2021 |
| Volvo Trucks| Neutral | 7/20/2021 |
| Navistar | Neutral | 6/8/2021 |
**Meritor**
Meritor’s CEO, Chris Villavarayan, highlighted that labor shortages and global supply chain constraints have created a challenging environment. He noted that rising freight and steel costs have impacted results, and price corrections don’t seem imminent. The company is working on cost recovery strategies and improving operational efficiency.
Meritor has raised its production guidance, expecting around 285,000 Class 8 units in North America and 415,000 in Europe. In Brazil, production is expected to reach 145,000 units, the highest since 2014.
**Cummins**
Cummins’ CEO, Tom Linebarger, emphasized strong demand across key markets, particularly in North America, which led to solid sales and profitability. He praised employees and suppliers for their resilience amid ongoing supply chain issues.
He also noted that underlying demand is outpacing supply, leading to increased backlogs. Global supply chains remain constrained due to high demand and lingering effects of the pandemic.
**Paccar (Kenworth & Peterbilt)**
Mike Dozier of Paccar stated that freight tonnage, industry utilization, and customer demand for new trucks are all strong. Kenworth and Peterbilt’s new models are gaining traction due to improved fuel efficiency and advanced technology.
PACCAR Parts reported record results, driven by strong industry utilization and supply chain management. E-commerce sales rose 56% in Q2 compared to the same period last year.
However, semiconductor shortages continue to limit production. While Paccar expects improvements by the end of the year, the situation remains dynamic.
**Daimler (Western Star and Freightliner)**
Martin Daum, CEO of Daimler Trucks, said that order books are full, and production is being limited by supply constraints. He added that the company is "sold out" for 2021 and hasn't opened orders for 2022 yet.
He also warned that the global semiconductor shortage will likely impact the second half of the year, and visibility into the supply situation remains low.
**Volvo Trucks**
Volvo reported strong freight markets and high truck utilization, which translated into a strong service business and good order intake. Despite supply chain disruptions, the company delivered nearly 46,000 trucks, though it had to temporarily halt production for a month.
The bus sector, however, continues to face challenges due to the pandemic, although fleet utilization has started to improve as restrictions ease.
**Navistar (International)**
Navistar reported a strong global truck market recovery and significant growth in the bus sector during the first half of 2021.
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