PACCAR Sees 4%-6% Parts Sales Growth in Q3 2025 as Market Stabilizes
Earnings Call Insights: PACCAR Inc (PCAR) Q2 2025
During the recent earnings call, PACCAR Inc (PCAR) provided an overview of its second-quarter performance and future expectations. CEO R. Preston Feight highlighted that the company achieved strong revenues and net income, with notable results from PACCAR Parts, the truck divisions, and financial services. The company reported revenues of $7.5 billion and adjusted net income of $724 million. PACCAR Parts reached record quarterly revenues of $1.72 billion and pretax income of $417 million.
Feight noted that PACCAR delivered 39,300 trucks during the second quarter and expects to deliver between 32,000 and 33,000 in the third quarter. He also discussed market dynamics, pointing to factors such as general economic conditions, a soft truckload market, and uncertainty around tariffs and EPA '27 policies. The projected U.S. and Canadian Class 8 market for 2025 is estimated at 230,000 to 260,000 trucks.
CFO Brice J. Poplawski mentioned the positive impact of R&D expensing and immediate R&D expense on fixed assets, which could provide cash tax benefits ranging from $300 million to $400 million.
Kevin D. Baney, Executive Vice President, shared that PACCAR Parts achieved record revenues in the second quarter with excellent gross margins of 30%. He estimated that year-over-year part sales would grow by 4% to 6% in the third quarter.
Outlook
Management guided for PACCAR Parts sales to grow by 4% to 6% in the third quarter. Baney emphasized ongoing investments in capacity and services, along with positive demand trends. Feight reiterated the expectation of delivering 32,000 to 33,000 trucks in the third quarter.
Third-quarter margins are expected to be around 13%, with Feight noting the difficulty in forecasting due to uncertain tariff structures. Assuming the current structure and market conditions, margins could reach around 13%.
The European above 16-tonne market is projected at 270,000 to 300,000 units, while the South American market is expected to reach 90,000 to 100,000 vehicles for 2025.
Financial Results
PACCAR reported revenues of $7.5 billion and adjusted net income of $724 million. PACCAR Parts revenue reached $1.72 billion, with a record quarterly pretax income of $417 million. PACCAR Financial Services posted pretax income of $123 million.
Truck, Parts and Other gross margins were 13.9% in the second quarter. Capital investments for 2025 are planned in the range of $750 million to $800 million, and R&D in the range of $450 million to $480 million.
Q&A Highlights
Jerry David Revich from Goldman Sachs asked about sequential price improvement and tariff impacts. Feight explained that the effects of tariffs were present in Q2 and expected to increase in Q3, affecting pricing versus costs.
Revich also inquired about government discussions on Section 232. Feight stated that the open comment period had been completed, and the investigation phase was underway.
Jeffrey Asher Kauffman from Vertical Research Partners asked about customer engagement for 2026 orders. Feight noted that customers were starting to engage on this, citing benefits to their cash flow. Poplawski added that R&D expensing would provide cash tax benefits in the $300 million to $400 million range.
Angel Castillo from Morgan Stanley sought insight on order dynamics and confidence for the second half. Feight cited overcapacity correction, regulatory emission standards, and tariff clarity as drivers for improved confidence.
Michael J. Feniger from BofA Securities asked about parts profit growth and inventory. Feight stated that inventory levels were well-positioned, with the company building orders and maintaining discipline.
Jamie Lyn Cook from Truist Securities asked about deliveries and margin bottoming. Feight noted that the company felt structurally stronger and demonstrated cycle-over-cycle strength.
Sentiment Analysis
Analyst questions centered on pricing power, tariff pass-through, margin outlook, and demand stabilization. The tone was generally neutral to slightly positive, acknowledging performance but pressing for clarity on margin impacts and forward demand.
Management maintained a confident and constructive tone, emphasizing “cycle-over-cycle strength” and structural improvements. However, they acknowledged market uncertainties, especially around tariffs and regulatory standards. Feight’s responses reflected both optimism and caution, particularly regarding tariff outcomes and their pricing impact.
Compared to Q1, management’s tone remained confident but more focused on navigating external uncertainties. Analysts shifted from concern over cost absorption to seeking reassurance on future demand and margin resilience.
Quarter-over-Quarter Comparison
Q2 guidance for PACCAR Parts sales accelerated to 4%–6% growth for Q3, compared to Q2’s 2%–4% outlook in the prior quarter. Gross margins guided slightly down to around 13% for Q3 from 13.9% in Q2, which was previously 14.8% in Q1.
Truck deliveries guided down to 32,000–33,000 for Q3 from 39,300 in Q2 and 40,100 in Q1, reflecting normal seasonal factors and market matching. The management tone shifted from addressing margin compression in Q1 due to initial tariff impacts to Q2’s more detailed discussion of tariff pass-through and anticipated market stabilization in the second half.
Risks and Concerns
Management cited ongoing uncertainty related to tariff structures, particularly Section 232 and IEEPA, as a key risk affecting margin guidance and pricing strategies. Regulatory changes for EPA '27 NOx emission standards and potential pre-buy activity were noted as factors shaping demand timing.
South American market outlook was revised down due to interest rates affecting consumer confidence and willingness to invest in trucks. Management is focused on cost control, supplier collaboration, and maintaining flexible production to mitigate risks.
Final Takeaway
PACCAR emphasized its record performance in parts and financial services, ongoing investment in technology and capacity, and proactive management of tariff and regulatory uncertainty. The company expects continued parts growth, a strong balance sheet, and structural improvements to support long-term shareholder value, while navigating near-term challenges in truck deliveries and gross margins driven by external market factors.