PACCAR INC earnings calls

Supply constraints and 2027 orders

Q (Stephen Volkmann · Jefferies): He asked if supply chain limits reduced deliveries this quarter and whether PACCAR is taking 2027 orders and what engines customers want.

A: Management said Q3 deliveries of 40.1 thousand were somewhat affected by supply constraints and suppliers are ramping up. They expect improvement in Q4 with guidance of 41 thousand to 43 thousand trucks. They also said customers are starting to place orders and prefer the 200-milligram engines while NCP rules remain uncertain.

"Our deliveries in the third quarter, 40.1 thousand were somewhat affected by supply constraints." — R. Preston Feight (CEO)

Parts demand indicators and margins

Q (Jerry Revich · Wells Fargo): He asked which lead indicators PACCAR tracks for the parts business and how to think about parts cadence. He also asked whether Q4 margin guidance includes parts uncertainty or improved truck profit per unit.

A: Management said they track share of wallet and have been growing share even as customers limit maintenance due to higher operating costs. They expect continued parts growth in the fourth quarter as the team gains share and eases doing business. For margins, they said missing parts on builds add a cost adder, but truck pricing remains strong.

"1 of our key things we look at is our share of wallet with our customers, and we have been able to grow share and increase while they are elevated cost." — Kevin D. Baney (PRESIDENT)

Will customers pay penalties or adopt compliant engines?

Q (Tami Zakaria · JPMorgan): She asked whether customers plan to buy non-compliant engines and pay penalties or adopt compliant platforms even if more costly.

A: Management said the year is mostly full and customers are beginning to order, but many want proven, stable technology. They said customers are asking for trucks with the 200-milligram engines and NCP to keep operations smoother. Demand will likely increase as fleets finalize capital plans.

"They are asking for us to deliver to them trucks with the 200-milligram and NCP." — R. Preston Feight (CEO)

Parts margin drivers and PACCAR Connect value

Q (Rob Wertheimer · Melius): He asked which factors drove the parts margin decline and whether price competition played a role. He also asked what customer problems PACCAR Connect solves and how it could create revenue.

A: Management said the parts margin pressure is primarily mix driven by customers deferring parts due to elevated operating costs and lower miles. They described PACCAR Connect as an integrated factory-installed hardware and open software platform that eliminates third-party dash installs. That platform can host customer-specific or PACCAR apps, enable predictive maintenance, and create future revenue streams while making dealer service easier.

"So step 1 is it gives us, PACCAR, an opportunity on a hardware side because now we are doing that work for the customer in a much more integrated factory direct manner." — R. Preston Feight (CEO)

Tariff effects this quarter

Q (Citi): He asked if there was a one-off tariff benefit in the quarter, how much, and whether further one-offs should be expected in Q4 or cleaned up by Q1.

A: Management said tariffs have become more stable but they still incur tariff costs and sometimes see benefits. They said these tariff effects were not material to results and there was no one-off benefit in Q3. They are continuing to work with suppliers and the government for clarity.

"We have had some benefits as well, but it is really not been material to the results of our performance." — R. Preston Feight (CEO)

Gross margin drivers and 2027 thinking

Q (David Raso · Evercore): He asked whether the flatter Q3-to-Q4 gross margin is more due to supplier-related production costs or to parts margins, and how to think about truck margins into 2027.

A: Management said the main cause is higher cost of production from supplier inefficiencies, not a major parts issue. They said price/cost remained favorable in the quarter driven by favorable truck price realization. They also said they are bullish on 2027 but expect uncertainty early in the year with clarity increasing through the year.

"I think you asked or you mentioned I think was kind of an ask, about price/cost, and price/cost remained favorable in the quarter." — R. Preston Feight (CEO)

2026 parts outlook and market mix

Q (Chad Dillard · Bernstein): He asked for the parts outlook for 2026, how fast parts are growing versus the $3.5 billion opportunity, and the vocational versus tractor outlook for 2027.

A: Management said they expect to finish 2026 within the previously forecast 3% to 5% growth range and see continued growth next year as fleet conditions improve. They noted growth from second-owner markets and their fleet services program, and increased TRP all-makes. On 2027 mix, they said fleet interest in new trucks and U.S. infrastructure investment support vocational demand, where they have about 40% share.

"We will finish within the range that we had forecasted, the 3% to 5% we have given previously." — Kevin D. Baney (PRESIDENT)

Confidence in Q4 parts growth and 2027 timing

Q (Kyle Menges · Citi): He asked why management is confident parts can grow high single digits in Q4 and whether H1 2027 could be softer than late 2026.

A: Management said confidence comes from strong dealer and customer relationships and a returning freight market. They added that fleet services growth shows they are gaining new customers and wallet share. On 2027 timing, they said NCP levels will be significant and until those are set early-year demand is uncertain.

"I would say we have a great team of people that are working closely with our dealers and our customers and that the freight market's returning." — R. Preston Feight (CEO)

Section 32, market share, and geography mix

Q (Jamie Cook · Truist): He asked how PACCAR is performing on Section 32 market share versus expectations and whether North America outperformance would be accretive to margins versus Europe.

A: Management pointed to truck margin improvement as evidence of competitive positioning, saying truck margin has grown materially since December 2025. They said market share is roughly flat and DAF/Europe remains strong with good order activity. They implied North America strength supports margins but noted other factors like supplier constraints still matter.

"Since December 2025 until now and say that gone from $240 million to $570 million." — R. Preston Feight (CEO)

How margins held despite lower deliveries

Q (Steven Fisher · UBS): He asked what allowed PACCAR to hit margin targets despite lower deliveries, and how broad the supply challenges are.

A: Management credited the company's people and teams across factories, parts, and finance for delivering results despite complications. They said build rates rose quickly which taxed suppliers and a single missed part on a truck can be impactful. Teams are working closely with suppliers and making progress toward higher Q4 deliveries.

"The simple answer, and it is really true, is amazing people." — R. Preston Feight (CEO)

Autonomy plans and cash generation

Q (Angel Castillo · Morgan Stanley): He asked about customer appetite for autonomous trucks and PACCAR's pace on autonomy. He also asked for cash-flow expectations and year-to-date cash generation color.

A: Management said they are developing a proprietary autonomous platform focused on safety and factory integration, with gradual deployment by lanes and conditions when it benefits customers. On cash, they said through nine months they generated $2.5 billion of cash, which is greater than net income, and they expect a similar cash-income relationship for the year. They noted last year's dealer flooring change was a one-off event.

"Through the 9 months, $2.5 billion is greater than our net income, and a lot of companies cannot say that." — Brice J. Poplawski (CFO)

Call logistics / analyst joining

Q (Scott Group): The operator noted Scott dialed in and asked to put him on the stage. Scott introduced himself but did not ask a question in this exchange.

A: No management answer in this exchange. It was only the operator coordinating and the analyst saying who he was.

Fleet growth, Q1 visibility, and NCP timing

Q (Scott Group · Wolfe): He asked whether fleets at ATA are planning growth versus replacement and what that implies for used market. He also asked how much of Q1 is sold and when NCP certainty will come.

A: Management said fleets want to grow but many still manage cash because of high fuel and driver costs, so growth is beginning but not broad yet. They said Q1 visibility is early and they expect a better view in the coming 4 to 8 weeks, and that NCP timing is unclear but 4 to 8 weeks feels like a reasonable estimate.

"I think 4 to 8 weeks feels like a good number." — R. Preston Feight (CEO)