Paccar Inc 2026 Q3 Earnings Call

Thank you, Joel, and good morning, everyone. My name is Ken Hastings, Paccar's Director of Investor Relations. Joining me this morning are Preston Feight, Chief Executive Officer, Kevin Baney, President, and Brice Poplawski, Senior Vice President and Chief Financial Officer. As with prior conference calls, we ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties that may affect expected results. For additional information, please see our SEC filings and the investor relations page of Paccar.com. I would now like to introduce Preston Feight.

Hey, thank you, Ken, and good morning, everyone. Kevin, Brice, Ken, and I will update you on Paccar's excellent third quarter financial results and business highlights. I'd like to start by thanking our wonderful employees all around the world who did a fantastic job of providing our customers with the highest quality trucks and transportation solutions in the industry. Paccar delivered excellent revenues of $7.94 billion and net income of $847.5 million in the third quarter. This is 19% revenue growth and 44% profit growth compared to the same period last year. Paccar Parts had record quarterly revenues of $1.78 billion, and Paccar Financial Services, $138 million in profit, was an increase of 9.4% compared to the same period last year.

We estimate this year's U.S. and Canadian Class 8 market to be in a range of 240,000-260,000 trucks, and next year to grow and be in a range of 240,000-280,000. The U.S. and Canadian truck market is being driven by economic growth, continued investments in infrastructure, and the general freight market recovery. In Europe, we project this year's above-16 ton market to be in a range of 300,000-320,000 units, and in a similar range for 2027. This represents continued truck replacement in a region with steady economic growth. We estimate this year's South American above-16 ton truck market to be in the range of 100,000-105,000 vehicles, and next year to be up slightly and in the range of 105,000-115,000 trucks. Paccar's premium trucks are performing very well for customers throughout all of Latin America.

Based on strong customer orders, Paccar increased deliveries to 40,100 trucks in the third quarter. Delivery volume will increase in the fourth quarter as suppliers become more able to ramp up their production to meet continued strong customer demand. Fourth quarter deliveries are anticipated to increase and be in the range of 41,000-43,000. Paccar's third quarter trucks, parts, and other gross margins were a strong 14.5%. Fourth quarter gross margins should remain high and again be in the range of 14%-15%. We look forward to a strong finish to this year and another very good year in 2027 as our customers benefit from Paccar's excellent trucks and new transportation solutions. Kevin Baney will now provide an update on Paccar Parts, Financial Services, and other business highlights.

Thank you, Preston. Paccar Parts achieved record third quarter revenue of $1.78 billion. This record is a result of investments in parts distribution, growth of the TRP all makes brand, expanding transportation solutions, and increasing dealer retail locations. We anticipate continued growth in the fourth quarter. Paccar Financial Services pre-tax income was a robust $138 million with 9.4% year-over-year growth. These excellent results reflect stable finance margins and higher used truck pricing. Similar to Paccar Parts, Paccar Financial provides steady foundational profitability during all phases of the business cycle. Last week at the American Trucking Associations' Truck Conference, Paccar proudly introduced its next generation transportation solutions platform called PACCAR Connect. This system provides a state-of-the-art technology platform and a beautifully integrated vehicle display.

PACCAR Connect has the ability to bring together fleet telematics systems, Paccar truck data, customer-specific productivity applications, Apple CarPlay, and electronic driver logs into a fully integrated system. This system will serve as a unifying platform that will enhance customer productivity and create new revenue streams for Paccar. This year's capital expenditures are projected to be between $650 million and $700 million, and research and development expenses will be $440 million to $460 million. In 2027, we estimate the company will invest $650 million to $700 million in capital projects and $460 million to $500 million in research and development expenses. Key technology and innovation investments include next generation clean diesel, hybrid and battery electric powertrains, growing the parts business, enhancing manufacturing capabilities, and expanding the connected vehicle offerings. Paccar's industry-leading trucks, best-in-class parts and financial services businesses, and advanced technology strategy position the company for an excellent future.

We are pleased to answer your questions.

Yeah, Steve, that's a nice observation. Our deliveries in the third quarter, 40,100, were somewhat affected by supply constraints. As we and others are building more trucks, I think the suppliers are trying to get up to speed on that. That's kind of what affected Q3 and what we think is improving in Q4 with the guide to 41,000-43,000 trucks. We're working closely with our suppliers to make sure they get the parts to us so we can build trucks. Makes it a lot easier to build the trucks when we got the parts.

Hey, Steve, that's great. We made the observation of it's easier to build trucks if you've got parts, and it's easier to price trucks if you know the cost. I think that the government's doing a very nice job, actually, of looking at the 2027 emissions regulations and figuring out how they are able to set the NCP levels. As you noted, they're not finalized yet, and I think that does give some customers pause about what their price will be. So we've had excellent discussions with our customers. We've known them for many years, and ATA was a great opportunity to sit with a lot of them and talk about what their needs are for 2027.