Paccar (NasdaqGS:PCAR) Q3 2025 Earnings Call October 21, 2025 12:00 PM ET Company ParticipantsDavid Raso - Senior Managing DirectorJamie Cook - Managing DirectorTami Zakaria - Executive DirectorKen Hastings - Director of Investor RelationsJeff Kauffman - Partner and Transportation and Logistics Equity ResearchBrice Poplawski - CFO and SVPAngel Castillo - Executive DirectorPreston Feight - CEOTim Thein - Managing DirectorKevin Baney - EVPConference Call ParticipantsKyle Menges - VP and Equity Research Analys ...

Financial Data and Key Metrics Changes - PACCAR achieved revenues of $6.7 billion and net income of $590 million in Q3 2025, with PACCAR Parts recording record quarterly revenues of $1.72 billion and pre-tax income of $410 million, reflecting a 4% revenue growth compared to the same period last year [3][4][8] - Gross margins for PACCAR's trucks, parts, and other segments were 12.5% in Q3, impacted by tariff increases on steel and aluminum, with expectations for fourth quarter margins around 12% as tariffs peak in October [5][6] Business Line Data and Key Metrics Changes - PACCAR Parts reported gross margins of 29.5% and a 4% increase in sales compared to the previous year, with similar growth anticipated in Q4 [8] - PACCAR Financial Services achieved pre-tax income of $126 million, an 18% increase from $107 million a year earlier, driven by a high-quality portfolio and improving used truck results [9] Market Data and Key Metrics Changes - The U.S. and Canadian Class 8 truck market is estimated to be between 238,000 to 245,000 trucks for this year, with projections for next year ranging from 230,000 to 270,000 [4] - The European above 16-ton truck market is projected to be between 275,000 to 295,000 vehicles this year, with expectations for 2026 to be in the range of 270,000 to 300,000 [5] Company Strategy and Development Direction - PACCAR is investing in capacity and services for PACCAR Parts, including a new distribution center in Calgary and an engine remanufacturing center in Mississippi [8] - The company is focused on long-term growth through investments in truck and engine factories, advanced technology, and clean diesel and alternative powertrains [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving market conditions and the potential for increased demand in the truckload sector as customers return to replacement cycles [17][24] - The implementation of Section 232 tariffs is expected to enhance PACCAR's competitive position, with management anticipating stability and improved margins as tariffs decrease [13][40] Other Important Information - Capital expenditures for this year are projected to be between $750 million and $775 million, with research and development expenses estimated at $450 million to $465 million [9] - The company is preparing for the EPA's 35 mg NOx standard, with confidence in their ability to meet regulatory requirements [26] Q&A Session Summary Question: Impact of Section 232 tariffs on competitive position - Management indicated that Section 232 tariffs will improve PACCAR's competitive position as they manufacture trucks in the U.S., with full implementation expected to stabilize costs [12][14] Question: Pricing strategy in light of tariffs - Management noted that while tariffs peaked in Q4, they expect to integrate pricing discussions without surcharges, focusing on the value of their trucks [45][78] Question: Customer demand and order outlook - Management highlighted mixed customer responses, with positive sentiment in vocational and less-than-truckload markets, while truckload sector remains cautious [24][40] Question: Inventory levels and destocking needs - Current industry inventory is at four months, with PACCAR's inventory at 2.8 months, indicating a healthy position without excess stock [74] Question: Future growth in parts business - Management expressed confidence in the parts business growth, leveraging AI for better service and anticipating continued demand as truck fleets age [69][70]