* Earnings per share in line with expectations
* Outlook suggests modest growth in key markets in 2014
* Shares fall as much as 4 percent (Adds details on European sales and U.S. outlook, updates shares)
By James B. Kelleher
Jan 31 (Reuters) - Paccar Inc reported a higher profit on Friday as the maker of commercial trucks and engines benefited from a big jump in demand in Europe, where customers rushed to purchase new vehicles ahead of the implementation of strict new emission rules.
The results, and the company's forecast for modest industry sales growth in key markets in 2014, were in line with market expectations. But analysts had hoped Paccar would raise its outlook for industry sales and disappointment over its failure to do so sent its shares as much as 4 percent lower on Wall Street.
"Overall, the growth rates implied by guidance appear below expectations, so we would not be surprised to see some weakness at the open despite good execution," JP Morgan analyst Ann Duignan said in a note to investors.
The company, which makes vehicles sold under the Kenworth, Peterbilt and DAF brand names, posted fourth-quarter net profit of $334.2 million, or 94 cents a share, up from $253.5 million or 72 cents a share last year.
Sales of trucks, engines and accessories as well as revenue from financial services rose 15 percent to $4.6 billion.
Analysts, on average, expected the Bellevue, Washington-based company to report profit of 93 cents a share, according to Thomson Reuters estimates.
The results were driven by especially strong sales in Europe, where new truck registrations surged nearly 130 percent in December to their highest level in more than seven years, according to industry figures. The trend was helped by truckers snapping up vehicles ahead of the so-called "Euro 6" emission regulations which took effect in January.
During a conference call to discuss the earnings, Paccar Chief Executive Mark Pigott offered an upbeat assessment of the outlook for North America, where the industry received orders for more than 70,000 trucks in the fourth quarter - the most since the first quarter of 2006.
"I think we are on a steadily improving path," Pigott said. "As we talk with our customers - we just had our large dealer meetings - more and more of fleets are saying ... 'Let's start to replace our vehicles. We feel good about our own industry. We see our end customers are improving their business.' So we feel good about it."
Pigott, a descendant of Paccar's founder who started the company in 1905, is stepping down as CEO later this year, though he will continue to serve as executive chairman.
He will be succeeded by Ronald Armstrong, the company's current president, who will be the first person from outside the Pigott family to run Paccar in nearly 50 years.
Paccar shares, which have risen more than 20 percent over the past year, were down 2.7 percent at $55.88 on Friday afternoon on the Nasdaq. Earlier in the session, the shares fell as low as $55.12. (Reporting by James B. Kelleher in Chicago; editing by Jeffrey Benkoe and Matthew Lewis)