PACCAR INC (PCAR) Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 revenue was $7.91B and diluted EPS was $1.66; both declined vs Q3 and YoY as truck volumes moderated and FX/price-cost headwinds weighed on results .
• Truck, Parts & Other gross margin was 15.9% in Q4, with management guiding Q1 2025 gross margins to 15.5%-16% even as deliveries are expected to dip to ~40,000, underscoring margin resilience despite lower production days outside the U.S. .
• PACCAR Parts remained a bright spot: Q4 revenue $1.67B and pretax profit $428.2M; parts gross margin ran ~30.9% in Q4, and management expects 2%–4% parts sales growth in 2025 .
• Capital allocation remained shareholder-friendly: $3.00 extra cash dividend paid Jan 8, 2025 and a 10% increase to the regular quarterly dividend to $0.33/share payable March 5, 2025 .
• Key 2025 catalysts: anticipated second-half strengthening in truck markets, stable inventories (Kenworth/Peterbilt at 2.3 months vs industry 3.1), and strategic investment in Amplify Cell Technologies to underpin BEV/hybrid optionality and cost position .

What Went Well and What Went Wrong

What Went Well

• Parts strength and resilience: Q4 Parts revenue rose to $1.67B and pretax profit was $428.2M; gross margin ~30.9% and management sees 2%–4% parts sales growth in 2025, highlighting robust aftermarket economics across cycles .
• Market share leadership: Kenworth/Peterbilt achieved a 30.7% U.S./Canada Class 8 share in 2024; vocational demand (infrastructure/LTL) provided durable support, with inventories at 2.3 months vs industry 3.1, indicating disciplined channel health .
• Strategic positioning and confidence in electrification/hybrids: Amplify JV progressing (buildings underway; scalable capacity), and hybrid systems seen driving double-digit fuel efficiency improvements, supporting a full powertrain portfolio strategy .

What Went Wrong

• YoY top-line/margin compression: Q4 revenue fell to $7.91B from $9.08B YoY; diluted EPS dropped to $1.66 from $2.70 as trucks per revenue declined and truck price-cost in Q4 was negative (price −0.6%, cost +2.7%), pressured by mix, fewer NA production days, and strong USD .
• FX headwinds: Q4 net income had a ~$20M negative impact from foreign currencies; management included FX in Q1 margin guidance to 15.5%–16% .
• Europe softness and mix: European registrations are expected to decline to 270k–300k in 2025, with Central/Eastern Europe notably weaker; Q4 geographic revenue in Europe fell vs prior year, contributing to ASP/mix pressure .

Financial Results

Sequential Performance (Q2 → Q3 → Q4 2024)

YoY Comparison (Q4 2024 vs Q4 2023)

Segment Sales and Pretax Profit (Q2 → Q3 → Q4 2024)

KPIs

Non-GAAP note (context): 2023 included a $600M pre-tax ($446.4M after-tax) EC-related claim; adjusted metrics reconciliation provided in releases .

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “PACCAR's fourth quarter revenues were $7.9 billion, and net income was $872 million.”
• “We estimate PACCAR's worldwide first quarter Truck and Parts gross margins to be similar to the fourth quarter and in a range of 15.5% to 16%.”
• “Kenworth and Peterbilt's inventory levels [are] at 2.3 months… industry inventory is running… 3.1 months.”
• “Q4 truck price versus cost was negative 0.6% on price and cost was 2.7%.”
• “We had a negative effect on our net income in the fourth quarter from… foreign currencies of about $20 million.”
• “We’re still saying [EPA 2027] can be the $10,000–$15,000 price range.”
• “Hybrid systems… might improve fuel efficiency… by double-digit levels.”
• “Amplify… we’ve cleared the ground now. We’re putting in the buildings… [we’ll] scale capacity based upon market demands.”

Q&A Highlights

• Deliveries/Geography bridge: Q1 deliveries ~40k; flat-to-up U.S. Class 8 offset by fewer production days ex-U.S., Mexico pre-buy unwind, and normal year-end inventory reduction .
• Pricing/mix and FX: ASP decline largely mix (regional/holiday) and strong USD; Q4 truck price −0.6%, cost +2.7% .
• Margin durability: Q1 gross margins guided 15.5%–16% despite ~10% lower production; tailwinds from fuel economy, reliability, and slightly lower warranty costs .
• Backlog/Order cadence: ~75% filled in Q1, ~50% in Q2; discussions underway for 2H25/2026; prebuy not yet material .
• Regulatory/Prebuy: EPA 2027 cost ~$10k–$15k; company agile to rule changes; California-compliant low-NOx engine already in market .

Estimates Context

• S&P Global/Capital IQ consensus estimates for Q4 2024 revenue and EPS were unavailable at time of writing due to an SPGI rate limit error. As a result, estimate comparisons are not included. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

• Margin resilience amid slower volumes: Q1 2025 gross margin guide (15.5%–16%) suggests structural profitability from product quality, parts mix, and warranty trends, supporting medium-term EPS stability despite near-term ASP/mix pressure .
• Aftermarket strength provides ballast: Parts gross margins ~31% and expected 2%–4% sales growth in 2025 offer counter-cyclical support to consolidated earnings .
• Prebuy and second-half 2025 demand recovery are plausible catalysts: early spot rate improvement, low used inventories, and EPA 2027 cost framework could drive orders and pricing by mid/late 2025 .
• Capital allocation remains attractive: sustained regular dividends plus extra distributions reflect strong cash generation and balance sheet, which can support both investment and returns .
• Execution on electrification options: Amplify JV enhances cost/quality control for BEV/hybrid modules and positions PACCAR competitively as regulations evolve .
• Watch FX and European mix: strong USD and CE Europe softness remain headwinds; embedded in guidance but could create quarterly volatility .
• Near-term trading: Without estimate comps, focus on margin guide durability, parts growth cadence, and any updates on TL recovery/prebuy timing; sustained margin signals and backlog fill could be stock-supportive catalysts .