Release Date: April 29, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• PACCAR Inc (PCAR, Financial) achieved record revenues of $7.4 billion and adjusted net income of $770 million in the first quarter.
• PACCAR Parts reported record quarterly revenues of $1.7 billion with excellent gross margins of 30.7%.
• PACCAR Financial Services achieved a robust pretax income of $121 million, reflecting solid portfolio growth and strong credit quality.
• The company is making significant capital investments in technology and innovation projects, including next-generation powertrains and advanced driver assistance systems.
• PACCAR Inc (PCAR) is well-positioned for future growth with its industry-leading trucks, expanding parts business, and best-in-class financial services.

Negative Points

• The North American truck market is being affected by uncertain economic conditions and the impact of new tariffs.
• PACCAR's truck parts and other gross margins were 14.8% in the first quarter, with expectations of a decline to 13% to 14% in the second quarter due to tariff impacts.
• The company faces challenges in passing on tariff-related costs to customers due to existing backlogs and customer relationships.
• There is uncertainty regarding future tariff policies, which could impact input costs and truck pricing.
• The Mexican market has shown a pause, likely due to economic impacts from ongoing trade discussions.

Q & A Highlights

Q: Can you elaborate on your guidance for gross margins, particularly regarding the impact of tariffs and how much you expect to pass through to customers? A: The tariff policies are currently uncertain, with a Section 232 investigation into tariffs for medium and heavy-duty trucks ongoing. The impact of these tariffs on input costs is significant, and while we aim to pass some costs to customers, the full impact is still uncertain. We are an American company building trucks in the markets for the markets, but components from other countries could be affected.

Q: How are you managing inventory levels, and what is your comfort level with current inventory levels? A: The industry inventory for Class 8 trucks is around four months, while ours is at 3.1 months. We are comfortable with this level, especially considering our focus on vocational trucks, which take longer to get into service.

Q: Regarding the EPA emissions changes, how does this affect your cost strategy, and are you pulling back on costs to protect margins? A: The regulatory standards involve greenhouse gas reductions and NOx standards. The potential changes in these standards could affect vehicle costs. We are prepared for any scenario with our investments in clean diesel technology and are ready to meet future standards.

Q: Can you discuss the potential impact of tariffs on your parts business and how you plan to manage any cost increases? A: For parts, we don't have a backlog, so cost increases can be passed on more immediately. Less than half of our parts purchases are from outside the US, and we are working with suppliers to manage costs. Proprietary parts are often made in America, which helps mitigate tariff impacts.

Q: How are you managing the dynamic environment with tariffs and pricing, and do you anticipate any margin impacts from production variances? A: The environment is dynamic, and we are managing it by working closely with suppliers and monitoring tariff policies. While there is uncertainty, we are confident in our ability to adapt and maintain our margins through strategic pricing and cost management.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.