UPDATE 2-Paccar earnings beat expectations; shares jump

* Q4 EPS ex-items 16 cents; Street view 7 cents

* Shares rise as much as 5 percent (Adds share rise, details, analyst comment, byline)

By James B. Kelleher

CHICAGO, Jan 29 (Reuters) - Paccar Inc (PCAR.O) reported stronger-than-expected quarterly results Friday as cost-cutting helped the truck maker expand its margins, sending it shares up as much as 5 percent.

Basili Alukos, an analyst at Morningstar, noted double-digit percentage growth in sales from the third quarter to the fourth. "That's impressive," he said.

But amid some of the worst economic conditions in decades for commercial vehicles, Paccar expressed caution, saying it expects conditions in many markets, especially Europe, to remain challenging in the coming year

The company, which makes trucks under the Peterbilt, Kenworth and DAF brands, reported a fourth-quarter profit of $46.1 million, or 13 cents a share, down from $113.1 million, or 31 cents a share, a year earlier.

The results included a one-time tax expense that the company said cost it 3 cents a share in earnings. Stripping that out, Paccar would have made 16 cents a share. On that basis, analysts' average forecast was 7 cents a share, according to Thomson Reuters I/B/E/S.

Sales fell 23 percent to $2.24 billion, above analysts' forecast of $2.03 billion.

Paccar said it expects challenging economic conditions in Europe to continue in 2010. But it forecast retail sales growth in the United States and Canada as rebounding economies there give trucking companies confidence to update their aging fleets.

Paccar shares were up 3.5 percent at $36.46 in late-morning trade on the New York Stock Exchange after rising as high as $37.07 earlier in the session. (Reporting by James B. Kelleher; Editing by Lisa Von Ahn and Jogb Wallace)