PACCAR INC (PCAR) Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 revenue of $6.67B and diluted EPS of $1.12; revenue and EBITDA materially beat consensus, while EPS modestly beat; gross margin compressed to 12.5% due to tariff headwinds . Estimates: EPS 1.08 vs actual 1.12; revenue $5.99B vs $6.67B; EBITDA $607M vs $752M*.
• Sequentially softer vs Q2 2025 (revenue $7.51B, EPS $1.37) and sharply lower year-over-year vs Q3 2024 (revenue $8.24B, EPS $1.85) on lower truck deliveries and tariff costs .
• PACCAR Parts delivered record quarterly revenue ($1.72B) and strong pretax profit ($410M); PACCAR Financial Services pretax income grew to $126M, supported by improving used-truck results .
• Management guided Q4 gross margin “around 12%” with tariff rebates phasing in after Nov 1; 2025 capex/R&D ranges narrowed slightly lower, while 2026 capex/R&D introduced; Class 8 NA outlook narrowed to 238–245k for 2025 and 230–270k for 2026 .
• Near-term stock reaction catalysts: tariff clarity (Section 232) reducing cost headwinds, potential pre-buy tied to EPA 35 mg NOx standard, and parts/FINCO resilience offsetting truck-cycle softness .

What Went Well and What Went Wrong

• What Went Well

  • Record PACCAR Parts revenue ($1.72B) and strong pretax profit ($410M); parts sales +4% YoY with gross margin 29.5% and continued network investments (new Calgary PDC, engine reman center) .
  • PACCAR Financial Services pretax income rose to $126M (+18% YoY), supported by high-quality portfolio and improving used-truck market; new used-truck center in Warsaw expanding reach .
  • Management expects Section 232 tariffs to “be good for PACCAR’s customers” and improve competitive positioning as rebates phase in, enabling removal of tariff surcharges and a return to normal pricing dialogues .

• What Went Wrong

  • Revenue and EPS declined sharply YoY (revenue $6.67B vs $8.24B; EPS $1.12 vs $1.85) on lower deliveries and tariff costs; truck segment sales fell to $4.38B from $6.03B YoY .
  • Gross margin compressed to 12.5% vs 13.9% in Q2 2025, with management citing an October peak in tariffs and Q4 margin guide around 12% as rebates ramp through the quarter .
  • Pricing down 1.3% YoY and costs up 4.6% YoY in truck business (negative 5.9% spread) tied to tariffs and mix; management highlighted tariff-driven impact on parts margins/mix as well .

Financial Results

Values with asterisk were retrieved from S&P Global.

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “PACCAR delivered good revenues and net income in the third quarter of 2025… PACCAR Parts and PACCAR Financial Services continued to deliver excellent performance and strong profits.” — CEO Preston Feight .
• “Section 232 tariffs will be good for PACCAR’s customers… It should improve our competitive position… becoming gradually more effective throughout the quarter” — CEO Preston Feight .
• “For the third quarter compared to last year… pricing was down 1.3% and costs were up 4.6%… tariffs played a big role” — CFO Brice Poplawski .
• “We feel like we can gain share and we have the capacity to support gaining share in the coming timeframe.” — CEO Preston Feight .
• “PACCAR Parts achieved gross margins of 29.5% and record third quarter revenue of $1.72 billion.” — EVP Kevin Baney .

Q&A Highlights

• Tariff implementation mechanics and rebates: Management expects rebates to phase in through Q4 with full benefit by early 2026; pricing will move away from tariff surcharges back to normal pricing discussions .
• Margin trajectory: Q4 margin guided to ~12%; improvement expected as rebates ramp and costs retreat; Q3 margin 12.5% vs Q2 13.9% .
• Demand/order book: Q4 order book ~60–70% filled, uniformly across regions; healthy internal inventory at 2.8 months vs industry ~4 months .
• Pre-buy dynamics: Potential 2026 demand uplift if EPA’s 35 mg NOx standard remains; customers evaluating capital allocation and regulatory clarity .
• Parts outlook: Tariffs/mix pressure noted, but continued investments and AI-driven logistics support growth opportunities into 2026 .

Estimates Context

• Q3 2025 delivered a modest EPS beat and significant revenue/EBITDA beat vs consensus: EPS 1.12 vs 1.08*, revenue $6.67B vs $5.99B*, EBITDA $752M vs $607M*. Parts and FINCO resilience plus truck deliveries (31.9k) supported the top-line above expectations despite margin headwinds . Values retrieved from S&P Global.
• Estimate revisions likely: Tariff clarity and removal of surcharges plus Section 232 rebates should raise Q4/Q1 margin expectations; capex/R&D ranges narrowed lower; NA Class 8 2025 narrowed to 238–245k could temper truck volume assumptions while pre-buy potential supports 2026 .

Key Takeaways for Investors

• Tariff overhang is easing: Expect margin pressure to trough in Q4 (~12%), with rebate benefits and surcharge removal improving pricing/margins into early 2026 .
• Parts and FINCO provide cushion: Record parts revenue and improving used-truck trends help offset truck-cycle softness; these segments remain defensive in down-cycles .
• 2026 setup improving: Pre-buy tied to EPA NOx standard plus potential truckload recovery and tariff clarity could drive a stronger 2026 order environment .
• Share gain opportunity: Domestic manufacturing footprint (>90% U.S.-sold trucks built in TX/OH/WA) and capacity investments position PACCAR to capture share as conditions normalize .
• Watch guidance cadence: 2025 capex/R&D ranges narrowed lower; monitor Q4 rebate qualification pace and margin recovery trajectory .
• Trading implications (near term): Positive surprise on revenue/EBITDA vs consensus and improving tariff backdrop are supportive; margin trough commentary tempers immediate upside—focus on rebate execution and Q4/Q1 margin prints .
• Thesis (medium term): High-quality parts/FINCO economics, disciplined capital allocation, and technology investments (AI, battery JV, ADAS) underpin cycle-to-cycle resilience and optionality for electrification/autonomy .

* Values with asterisk were retrieved from S&P Global.