PACCAR INC (PCAR) Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 revenue was $7.44B and GAAP diluted EPS was $0.96; adjusted diluted EPS was $1.46 due to a $264.5M after-tax EC-related litigation charge. Revenue beat consensus, but adjusted EPS missed, and management guided Q2 gross margins lower on tariffs and pricing timing .
• Record PACCAR Parts revenue ($1.69B) and strong pretax profit ($426.5M) offset softer truck margins; Truck, Parts & Other gross margins were 14.8% in Q1 with Q2 guidance of 13–14% given full-quarter tariff impacts .
• Management cited uncertain economic conditions, tariff policy investigations (Section 232), and timing of backlog repricing as near-term headwinds; expects second-half market improvement and continued parts growth (2–4%) .
• Catalysts: litigation resolution progress, tariff policy clarity, used-truck market improvement, and steady vocational/LTL demand; dividend maintained at $0.33 per share .

What Went Well and What Went Wrong

What Went Well

• Record PACCAR Parts revenue ($1.69B) and solid pretax profit ($426.5M); parts gross margin ~30.7% and expected 2–4% sales growth in Q2 and FY25. “PACCAR Parts…deliver greater uptime and profitability…world-class logistics capabilities” .
• Financial Services strength: PFS pretax income $121.1M (+6% YoY), portfolio quality remained strong; used truck center expansion in Warsaw planned to bolster European sales .
• Liquidity and equity: Operating cash flow $910.3M; stockholders’ equity $18.02B; continued capex ($171.9M) and R&D ($115.4M) investment in next-gen powertrains and connected services .

What Went Wrong

• Adjusted EPS missed S&P Global consensus due to tariff impacts and pricing lag; management reduced near-term gross margin expectations (13–14% in Q2) as full-quarter tariffs hit costs before repricing can flow through .
• Truck deliveries declined YoY (40,100 vs 48,100) and QoQ (43,900), with Mexico demand pausing amid trade discussions; NA/EU deliveries trend flat sequentially .
• EC civil litigation required an additional $350M pretax ($264.5M after-tax) charge in Q1, depressing GAAP earnings; management is progressing toward resolution but costs were higher than prior estimates .

Financial Results

Headline metrics (prior two quarters for trend analysis and Q1 2025)

Consensus vs Actual (Q1 2025)

Values retrieved from S&P Global.

Segment Sales and Revenues

KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “PACCAR achieved revenues of $7.4 billion and adjusted net income of $770 million. PACCAR Parts achieved record quarterly revenues of $1.7 billion… We anticipate delivering 37,000 to 39,000 trucks in the second quarter. … We anticipate second quarter margins could be in a range of 13% to 14%.” — Preston Feight, CEO .
• “PACCAR’s first quarter adjusted net income of $770 million excludes a $265 million after-tax provision related to EU civil litigation settlements… Parts gross margins of 30.7%. We estimate parts sales to grow by 2% to 4% in the second quarter and for the full year.” — Harrie Schippers, President & CFO .
• “Capital expenditures are projected to be in the range of $700–$800 million and research and development expenses… $450–$480 million in 2025… increasing investment in next generation internal combustion, hybrid and battery-electric powertrains… and advanced driver assistance systems.” — Company press release .

Q&A Highlights

• Margin decomposition and tariffs: Q1 sequential cost +1% vs flat price; Q2 guide reflects full-quarter tariff impacts before pricing fully flows through backlog; pricing increases of ~4–7% are being implemented but sequencing matters .
• Inventory and backlog comfort: Industry inventory ~4 months; PCAR ~3.1 months; Q2 substantially full with orders flowing into H2; vocational and LTL steady; Mexico softer on trade uncertainty .
• Regulatory clarity: NOx standard path affects hardware costs; GHG review could adjust EV targets; PCAR prepared for multiple scenarios (clean diesel, hybrids, EV) .
• Parts pricing and pass-through: Easier to pass costs in parts given no backlog; expected immediate pricing responses if tariffs impact procurement .
• Cost mitigation: Working with suppliers on USMCA qualification and HTS codes to mitigate tariff costs; footprint “local-for-local” provides resilience .

Estimates Context

• Q1 2025: Revenue beat S&P Global consensus ($7.44B vs $7.00B*), while adjusted EPS missed ($1.46 vs $1.58*). EBITDA also modestly beat consensus ($1.00B* vs $0.95B*) .
• Implications: Lower Q2 margin guidance (13–14%) and backlog repricing timing suggest near-term EPS estimate risk; Parts growth (+2–4%) and improving used-truck pricing mitigate some pressure .
  Values retrieved from S&P Global.

Key Takeaways for Investors

• Near-term caution: Expect Q2 gross margins to trough (13–14%) on full-quarter tariff costs before pricing fully offsets; EPS estimates may drift lower until tariff policy clarifies .
• Structural strength: Parts maintained 30%+ margins and guides +2–4% growth; a stabilizing used-truck market and strong PFS portfolio underpin earnings resilience .
• Policy optionality: Section 232 outcomes and EPA NOx/GHG reviews could turn from headwind to relative advantage given PCAR’s local manufacturing footprint and multi-powertrain readiness .
• Litigation overhang reducing: Additional EC-related charge taken ($264.5M after-tax); management indicates progress toward substantial resolution, lowering future headline risk .
• Demand trajectory: Vocational and LTL stable; management expects H2 demand improvement as tariff/emissions policy stabilizes; backlog and inventory levels remain manageable .
• Capital allocation: Dividend maintained ($0.33/share) and continued investment in capex/R&D focused on powertrain and connected services support medium-term competitiveness .
• Trading setup: Revenue beats with margin compression and EPS miss can create volatility; watch tariff policy clarity and pricing pass-through progress as potential positive catalysts .