PACCAR Inc. (PCAR) Earnings & Analysis

Latest quarter

PACCAR’s adjusted earnings per share of $1.61 matched the consensus for the third quarter. Truck, Parts and Other revenue, as counted by the consensus, was $7.4 billion, below the $7.5 billion estimate; that comparison excludes Financial Services revenue.

Including Financial Services, PACCAR reported total revenue of $7.9 billion, up from $6.7 billion a year earlier. Its filing attributed the increase primarily to higher truck revenue: truck sales rose to $5.60 billion from $4.38 billion as deliveries increased, particularly in the U.S., Canada and Mexico. Parts sales rose to $1.78 billion from $1.72 billion, while Financial Services revenue fell to $558.9 million from $565.3 million.

The filing reported truck gross margin of 10.2%, compared with 5.8% a year earlier, and attributed higher truck pretax returns primarily to better price realization and lower tariff costs. Parts gross margin fell to 28.5% from 29.5%. PACCAR reported free cash flow of $636.1 million, compared with $1.2 billion a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

CEO Preston Feight said customer orders supported third-quarter deliveries of 40,100 trucks, although supplier constraints affected the number PACCAR could complete. He said suppliers were trying to catch up with higher industry build rates and that PACCAR was working with them to secure parts. Feight expects fourth-quarter deliveries to rise as supplier production improves.

Asked about pricing and production costs, Feight said building trucks without all the required parts adds cost. He said truck pricing had been favorable, while production costs and the lag between pricing a truck and delivering it from the backlog remained factors. The filing attributed the year-over-year improvement in truck pretax returns primarily to higher price realization and lower tariff costs.

Feight said uncertainty over non-conformance penalties for engines under 2027 emissions rules was giving some customers pause about truck prices. He said customers wanted time to assess newer engine technology and were asking for trucks with existing engines and a penalty. Asked about early-year demand, he said the year’s factory capacity was filled and PACCAR was filling the first quarter, but expected a clearer view as fleet customers made spending decisions.

President Kevin Baney said PACCAR was increasing parts volume and share in a smaller market, where customers facing higher operating costs were concentrating on required maintenance. He said the company had gained customers through its fleet services program and expected continued parts growth. Baney also pointed to growth from second owners and the TRP and all-makes business.

On investment, PACCAR said it expects capital projects of $650.0 million to $700.0 million and research and development expenses of $460.0 million to $500.0 million in 2027. Feight said PACCAR was developing an autonomous-vehicle platform to allow autonomous systems to be integrated into trucks at the factory, with safety and validation determining the pace of introduction.

Guidance

PACCAR now expects 2026 capital expenditures of $650.0 million to $700.0 million, previously $700.0 million to $750.0 million, and research and development expenses of $440.0 million to $460.0 million, previously $450.0 million to $480.0 million.

For 2026 industry markets, PACCAR now estimates U.S. and Canadian Class 8 retail sales of 240,000 to 260,000 trucks, previously 230,000 to 270,000. It expects European registrations of trucks above 16 tonnes of 300,000 to 320,000, previously 290,000 to 330,000, and the South American above-16-tonne market at 100,000 to 105,000 trucks, previously 100,000 to 110,000.