UPDATE 1-Paccar net drops; cuts European industry outlook

* Reports 2nd-qtr net profit of 7 cents a share

* Says profits includes one-time gain

* Cuts outlook for European truck demand

CHICAGO, July 28 (Reuters) - Paccar Inc (PCAR.O) said on Tuesday its second-quarter earnings plunged more than 90 percent as a weak worldwide freight market walloped demand for its trucks and forced the company to temporarily close some of its plants.

The company warned the "challenging market conditions" were continuing, especially in Europe, where it lowered its forecast for industrywide truck demand to levels last seen in 1992.

Paccar, which makes vehicles under the Peterbilt, Kenworth and DAF brands, reported a second-quarter profit of $26.5 million, or 7 cents a share, down from $313.5 million, or 86 cents a share, last year.

Sales fell 55 percent to $1.85 billion.

Analysts, on average, had expected the Bellevue, Washington-based company to report a profit of 4 cents a share on sales of $1.70 billion, according to Reuters Estimates.

The results included a one-time pretax gain of $47.7 million, which offset an operating loss of $36.5 million in the company's truck segment. (Reporting by James B. Kelleher, editing by Maureen Bavdek)