PACCAR INC Q3 FY2024 earnings call

• PACCAR delivered 44,900 trucks in Q3, with Q4 expected to be around 42,000 due to more production days in Europe offsetting fewer days in NA and supplier issues.
• PACCAR Parts had Q3 gross margins of 30.1%, sales up 5% y-o-y, and expected to grow ~4% in Q4. Opened a new distribution center in Massbach, Germany.
• PACCAR Financial Services had pre-tax income of $107 million in Q3, with a healthy portfolio and used truck market normalized in NA but soft in Europe.
• Global market insights: US/Canada Class 8 market, Europe truck registrations, and South America above 16-tonne market outlooks discussed, with PACCAR's trucks performing well in various regions.

PACCAR earned $972 million on revenues of $8.2 billion in Q3. PACCAR Parts' Q3 revenues increased 5% to $1.66 billion with pre-tax profits of $407 million. PACCAR Financial had pre-tax income of $107 million in Q3. In terms of truck deliveries, 44,900 trucks were delivered in Q3, with Q4 expected to be around 42,000. The U.S. and Canadian Class-8 market is estimated at around 260,000 trucks this year and 250,000-280,000 next year. Peterbilt and Kenworth combined Class 8 share increased to 31.1%, and their medium-duty market share in the first nine months of 2024 was 17.2% compared to 14.5% last year. Europe's truck industry registrations in the above 16-tonne segment are estimated at ~300,000 this year and 270,000-300,000 next year. South America above 16-tonne market is projected at 110,000-120,000 trucks this year and next.

• Q4 truck deliveries expected to be around 42,000.
• US and Canadian Class-8 market estimated at ~260k this year, 250k-280k next year. Europe truck registrations ~300k this year, 270k-300k next year. South America above 16-tonne market 110k-120k this year and next.
• PACCAR Parts sales expected to grow ~4% in Q4.
• This year's capex projected at $760M-$800M, R&D $450M-$470M. Next year capex $700M-$800M, R&D $480M-$530M.

• Supply chain issues: Fewer production days in NA due to holidays and supplier-related limitations affecting Q4 deliveries.
• Market volatility: Uncertainties in freight market conditions, election outcomes, and regulatory changes impacting truckload carrier buying decisions.
• Used truck market: Softness in Europe used truck market compared to normalized NA market.

Q: Steven Volkman asked about pricing and how it might flow through in Q4 and 2025.

A: Preston Feight said price was flat in Q3, costs up 3%, vocational market strong, truckload sector stabilizing, expecting growth in 2025.

Q: Rob Wertheimer followed up on gross margin sequential move.

A: Preston Feight said no major differences, product introductions contributing to strong truck desire.

Q: Tami Zakaria asked about Europe production outlook and pricing for 2025.

A: Harrie Schippers and Preston Feight said Europe volumes down more than market this year, but well-positioned to build to demand next year, and no binary on pricing opening, but had good conversations with customers at ATA show.

Q: David Raso asked about geographic composition of Q4 deliveries and margin mix.

A: Harrie Schippers said Europe relatively flattish, North America has normal holiday cadence and supplier issues to work through.

Q: Jerry Revich asked about cost of materials and truck backlog mix.

A: Preston Feight said cost of materials could be a tailwind, truck backlog has strong truck vs tractor ratios.

Q: Tim Thein asked about election uncertainty and order cadence.

A: Preston Feight said customers are thinking about economic conditions and will increase truck buys when rates change.

Q: Kyle Menges asked about R&D guidance and medium-duty market.

A: Preston Feight said R&D investment based on good projects, medium-duty market expected to be healthy in NA next year.

Q: Chad Dillard asked about '25 North America truck guide and Finco business.

A: Preston Feight and Harrie Schippers discussed truck mix and Finco's strong performance with healthy portfolio.

Q: Jeffrey Kauffman asked about South American growth and truck specs.

A: Preston Feight said trucks in South America have specific specs for local conditions, but generally similar to European trucks.

Q: Michael Feniger asked about used truck market normalization and parts margin.

A: Harrie Schippers and Preston Feight said used truck spread normalizing, parts team growing business in smaller after-sales market.

Q: Scott Group asked about gross margin bottom and market share approach.

A: Preston Feight said Q4 likely bottom for gross margin, and PACCAR will pursue market share growth and strong performance.