PACCAR (PCAR) 29 Jan 192018 Q4 Earnings call transcript

Company Profile

Participants

Ken Hastings	Director of Investor Relations
Ronald Armstrong	Chief Executive Officer
Preston Feight	Executive Vice President
Harrie Schippers	President and Chief Financial Officer
Michael Barkley	Senior Vice President and Controller
Ross Gilardi	Bank of America Merrill Lynch
Joel Tiss	BMO Capital Markets
Steve Volkmann	Jefferies
Jerry Revich	Goldman Sachs
David Raso	Evercore ISI
Seth Weber	RBC Capital Markets
Andrew Casey	Wells Fargo Securities
Ann Duignan	JPMorgan
Jamie Cook	Credit Suisse
Steven Fisher	UBS
Joseph O'Dea	Vertical Research Partners
Neil Frohnapple	Buckingham Research
Adam Uhlman	Cleveland Research Research Company
Robert Salmon	Wolfe Research, LLC

Call transcript

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning, and welcome to PACCAR’s Fourth Quarter 2018 Earnings Conference Call. All lines will be in a listen-only mode until the question-and-answer session. Today’s call is being recorded. And if anyone has an objection, they should disconnect at this time. I would now like to introduce Mr. of Director PACCAR’s Hastings, Investor Relations. Ken Mr. go please ahead. Hastings,

Ken Hastings

And welcome Good Executive President; webcast. phone by Chief Vice would Executive Investor My Ron Senior Schippers, and morning to Financial morning. like those and Officer; Relations. of Michael and Director and is Officer; Hastings, Barkley, listening me Armstrong, Vice Controller. Ken this are We name PACCAR’s joining President those Chief Harrie on President the Feight, Preston

members will detail conference of participate and prior the we and and and calls, that affect is economic, the mode. that any competitive in involve general, filed media with with our line risks may the uncertainties described As expected in Certain in ask on reports information SEC. be risks listen-only periodic A a results. including of more conditions presented uncertainties, today forward-looking summary

Ron paccar.com. page information, now like additional Investor the For Relations introduce see in please I would filings SEC Armstrong. of our to

Ronald Armstrong

record year share beginning XXXX, million at PACCAR declared time. was first has Harrie dividend XX% testing DAF the authorized of Schippers, and full-year accomplishments. set shares prestigious result a business dividend X.X% net of is regular fourth a Good last around of during were XXXX was and a profit and approximately models, by and many revenues the income XXXX, billion margins which in pricing years parts XXXX, XXX,XXX to net Truck billion, third quarter achieved than last record has revenue us income quarter organization Brazil record and PACCAR returns. in in record-setting repurchases reporting fourth PACCAR CDP. a International years was X%. robust will an its in and Year with recognized share for XXXX PACCAR dividends Financial DAF PACCAR and PACCAR XX has new business Directors than for years practices income consecutive are the outstanding quarter. third and currently the Award. Peterbilt greater, compared XXXX, year with year battery-electric, better net XX.X% of important exceeded in PACCAR’s puts Thanks of were PACCAR’s we’re on PACCAR a fourth $XXX the for during records firm, of Truck raised annual PACCAR’s was in and quarter The pre-tax and XX% quarter. achieved sustainable increased PACCAR field higher Revenues of consecutive truck year Brand were record price The net declared XX% Year the Truck the in that In $X.X third dividends cell repurchased declared for report more year-end. on introduced fourth XX,XXX quarterly XX,XXX a of earned paid the $XXX million in was in were worldwide. total which of PACCAR’s a years. to XXXX. with fourth PACCAR many XX% to most the Workplaces volume realization Preston comparable record the the and last focus highlights quarter and X% We a of And of by a rating, and the quarter XXXX Parts earned to the per Truck of X.X% hydrogen Peterbilt the year. was second since XXXX. $X fourth which compared X,XXX for PACCAR’s the you quarter billion $XXX delivered XX% world. the revenues. were delivered the celebrated quarter, to X.X I XX net billion more trucks Board five strong morning. return year production per after-tax adjusted the record operation Kenworth for dividend XX% employees PACCAR has on broad supplier increased companies, for achieved for year-end. fuel $X.XX income of delivered XXXX. build of at improvement A excellent which results at top the last net other XX% X.X%. XXXX performance. another additional shareholder resulted increase earned Total business increase million average company. and innovation. customers. an days environmental third fourth $XXX celebrating for in Women yield income and and just range about our quarterly annual the Trucking. on X% Feight, Europe Kenworth, income. income. PACCAR year the especially and good its million. and in focus the recognized remaining honor hybrid share, market to million revenues a quarter CDP. of a every PACCAR update as Top $XX.X proud $X.X which the of gross over Women since dividends trucks record over In DAF dividends at

quarter, to constraints, shape. additional material compared supplier the supplier end improved labor During the and incurred to we factories quarter, the third deliveries good the costs the in By quarter. due to but were conditions some of fourth

estimated round first again gross to increase purchasing the industry. a higher achieving projected in when and and – Deliveries managing and are to year’s of supplier delivering around did and fourth job be of highest the production, expecting trucks Truck to teams quarter, Kenworth over XX.X%. a to we’re margins XX% record first slightly factories operating number last first DAF management compared deliveries In are quarter. margins fantastic the quarter up the and Peterbilt, Our compared quarter. in to first parts to the

Services. PACCAR on and Feight DAF will Financial PACCAR Now provide Parts update an Preston

Preston Feight

Ron. again DAF record DAF of tractor making XXXX. achieved Thanks, market of XX.X%, is progress the above activity its goal greater in transport XX% in truck registrations, European market was XXXX. an market projected share. Europe’s and registrations continued compared outstanding XXX,XXX and share towards demand market XX-tonne and to European than European great robust XXXX. economies European was to leader a strong economies. DAF XX-tonne XX.X% freight reflecting had grow in are growing

and excellent business has and combined million profit profit in revenues generated market Parts. PACCAR’s and pre-tax compared strong to revenue in of its distribution PACCAR $XXX $XXX profit for over billion PACCAR of consistent and with market In Parts record fourth parts XXXX, million. be steadily a a quarterly annual record technologies PACCAR truck in created increased customer-focused a trucks. capacity revenues $XXX was We another in XXXX. trucks $X.X to of environment XXX,XXX growth XX% to grew annual operation. the of were very quarter share strong expect years, resulting engine engines investments This year, pre-tax with XXXX and has greater number Annual the Parts grew XXX,XXX annual record million. XX% range and

quarter to increased increased revenues $XXX XX% were record XX% to period sales income Fourth million. the Kenworth portfolio size to PACCAR fourth in We The income $XX same XX% continues year. X% to and XXXX used quarter this and X pre-tax grow expect XXXX resale billion. $X.XX pre-tax perform to Financial million. increased competitors’ a the well. XX% by annual to parts in values over compared to XX% X% and Class truck Kenworth vehicles. truck last to Peterbilt Peterbilt increased command premium over values year. Services

the trucks enhances throughout their Kenworth an on PACCAR businesses Harrie be XX business will truck and prices. now volumes another PACCAR of and all and Services than used for PACCAR’s phases good they to Peterbilt larger year than ago. and contributions PACCAR years profit are provide innovation. of inherently were Schippers update the XXXX cyclical expect new financial Parts cycle. results less consistent and are much Financial These the sale We profitability

Harrie Schippers

Thanks, DAF a for customers a well at terrific of port technology more a with Kenworth, Preston. tonnage X% volumes only Earlier trucks into to many Fleet introduced and expect at XXXX. Model Class visibility XXX,XXX market the share. production X.X% are trucks, in to this CES was regional to innovative XXXX. production and change, TXXX cell the to as the distribution, Peterbilt electric PACCAR with economic models. for with nearly are on truck late X.X% and U.S. Model and customers, Kenworth these powertrain a in the past, in PACCAR to backlog which likely applications and case by superior Services. we record industrial XXX after-market Peterbilt further medium-term. a OEM XXX In alternative efficiency XX% a in X the XXXX, Longer-term, most Kenworth We GDP Las refuse, and powertrain XXX,XXX alternative surge were expected freight Vegas. expand range this the last Kenworth in U.S. high freight fourth of applications. trucks sales another see have strong products as very that PACCAR and Model achieved competitive Electric, demand be and We indicators the grow hybrid the Canadian CF year. vehicles display a trucks. firsthand. customers which to support In benefiting our are growth. and Hybrid well trucks. X%, will technology XF levels Electric, introduced trials emissions and bodes vehicles. are several retail growth, people and and introduced focusing X% In the urban XXXX, pre-buy at had an and Show month, X production industry-leading industrial of delivery hydrogen and show. freight quarter in Canada in for LF growth economically U.S. related market orders Hybrid CF opportunity the trucks. utilization growth. U.S. and two displaying the driven the by feasible freight Technology XXXX, the fuel Class and had is applications. Parts In to of trucks driven Peterbilt XXXX, on truck units. XX.X% production operating Peterbilt provided GDP DAF in XXX, interested not were field often be These strong in TXXX economic will by been and has were showcased Kenworth and from Peterbilt and technologies cycle, were turnout products PACCAR XXX,XXX from the truck record Financial and

PACCAR’s expect in do developing most team in Texas, we Valley The preparing web an long-term entrepreneurial alternative Truck production-ready the for Denton, PACCAR extensive XXXX the its making with has the community PACCAR We powertrain These a honored In The and start-up in efficiency arms innovations heavy its capital parts Award invested $XXX million Configurator million engine to cost-effective truck. applications in investments prestigious capital and factory XXXX, planning Mississippi Canada your you. answer to and Kenworth, in expenses efficiency These Columbus, R&D to in add capacity, increase Manufacturing capacity distribution and with recognized a companies, Innovation we reputation DAF While and R&D Center in and Frost $XXX the questions. earned Computable for technologies, Ste-Thérèse, to innovations from each in XD operational technology PACCAR million full-year $XXX Leadership are Sullivan. to focused for and XXXX. factory the XXXX the venture in Peterbilt academia. enhance manufacturing to Peterbilt diesel powertrain Thank PACCAR manufacturing. the Netherlands was in firms remain autonomous we’re truck of manufacturing Award and XXXX. team exemplify The company’s and & investments and application. $XXX truck $XXX operations increased diesel developed PACCAR million complements excellence. the safety with its on software and and alternative in Center generation the is was efforts to level pleased investments next by in PACCAR’s first facilities. Innovation $XXX Silicon and excellent for million. will future. develop trucks, to R&D The be and in powertrain additional We’d technologies of for completed foreseeable PACCAR’s expenses million efficient DAF capital factory

Operator

Ross [Operator from line Lynch. Our question Instructions] of first America Bank comes the Gilardi of Merrill with

Your line is open. now

Ross Gilardi

couple of just good morning, a got everybody. questions. good Hey, afternoon, I

more in this bit an are we Day First remember spot active do at parts, maybe talk a the given of cycle? deceleration little be we’re think Class you that a could in age had the of interesting the You’ll some somewhat year. the But about you fleet. chart you factoring Parts all, Investor for I of business, where showing sweet your in

So even year? slowdown why this actually would that

Ronald Armstrong

say, PACCAR for just of lot which last I’d Parts. year Well, an They the of things place, benefits year. a reap last we year put was extraordinary in those

invest We this additional year. in capacity continue to

two got Vegas Las we’ve Brazil year. major one So pretty one in next projects: in for and

So generate that positive place have in the will programs to been put returns. continue

this this we’ll somewhere progresses X% have months insight to better in three see range, we point that but And X% we’ll and discussion year so, we now. the how think from as in have at the

Ross Gilardi

you super What be bit. order trends it in Is could obviously, at slow levels towards would mean, throughout more color positive sound really everybody they’ve about see big I a like, still you fleets, great? normal on just smaller Thanks, do the quite X the got trends year levels. started Yes, to maybe this then, year, Is back there? it. just you any there? order but were talk mean, Class fleets? it you’re normal they just Ron. and the And I

Ronald Armstrong

it backlog the was our that and in Yes, it call was last ATD already several orders just backlog. meeting confident great are to last some about that the fill in super still that for trucks to was, I I are at XXXX. confident deliver orders would about the there – abnormal, normal, taking very over continue are meeting very call I XXX,XXX would the which week, openings will for with yes, and year the dealers. of dealers The we’re orders ability the

from perspective. So very our are industry conditions positive

Ross Gilardi

you. Thank

Ronald Armstrong

Thank you.

Operator

comes next Joel BMO. from with Our question Tiss

open. now Your is line

Joel Tiss

so [ph] not [I’m it on make used early.] to

Ronald Armstrong

always love, We yes.

Joel Tiss

XX.X% of year. a And there’s of XXXX? there, maybe us unusual Usually, end strong gearing kind this you Two running year? towards just the a things. give end is at Can up are the Harrie up for the sense, Why something of just you you inventories question. or more of a if I the them in wondered normalize the

Harrie Schippers

by looking – the about talking you Are the… at balance sheet,

Joel Tiss

Yes.

Harrie Schippers

year-to-year? from value carrying …the

Ronald Armstrong

say, I’d can have one. reflecting mean, higher Yes. the Harrie this mostly think it’s I just But I levels. production

Harrie Schippers

higher the build right, Exactly rate. you’re Ron, reflecting

Ronald Armstrong

Yes.

Joel Tiss

your or us rate penetration is What little can And base? you background your you. it market guess growth you parts total Is is give how an can XX% then also of a idea, out potential can do there much longer-term? us you installed – on penetration? tell your so or your what is Thank we just on gauge XX%, share the parts

Ronald Armstrong

kudos say, trucks. our growth of – we seeing gauge – would from not what Yes. competition, there’s there very unfortunately, that, I’d I that they’ve our markets in But again, the that’s all really our really in share market made think without parts can for to team precise to investments is last say continue a position numbers. And the we’ll strong to is on in a things of the year revenue parts parts I glean programs. grow based like our without great on relative in share and – – the knowing improved warehousing, and again,

Joel Tiss

Thank you. right. All

Ronald Armstrong

Thank you.

Operator

comes from question Jefferies. next Steve with Our Volkmann

is now line Your open.

Steve Volkmann

morning, guys. Good Hi.

Ronald Armstrong

Steve. morning, Good

Steve Volkmann

little bit on push bit pricing going was could I your commentary. if more to a a I little you for Ron, see color

other just costs up then of you cost XXXX, the like price Thank how bit kind balance think, with that I’m to inflation that labor about or And about things. fourth on it you. forward? said little increases One in forth? cost be long parts’ curious positive, two you maybe I’d as In opportunities X% does trended? saw going third as of – negative and there so words, we And look into to the price neutral, and chance how that more does are backlog is? were and being the things look some second, like and a as how guys compare I the quarter, price get also with prices in sounds sort you curious the is,

Ronald Armstrong

I’ll let and XXXX. about cost about little a Michael talk of the details talk then I’ll side bit the Michael?

Michael Barkley

were for revenue than fourth they X%. On about quarter, the X.X% which over the which our side, less cost is up or was up side –

quarter. price So during we had some the positive realization

Ronald Armstrong

as look So the – in Steven, but you next I year, think, the North orders well house pretty for are America.

And probably XX% think little if you enhancement we margin that so for quarter And first the we what is look a in we’d is we what full-year, range commented on and first to know the year. in to up around at bit the say, pricing the quarter. XX.X% XX% the

Steve Volkmann

helpful. Okay, That’s thanks.

Ronald Armstrong

Thank sir. you,

Operator

question comes from next with Sachs. Jerry Goldman Our Revich

Your now open. line is

Jerry Revich

Hi, good morning and good afternoon, everyone.

Ronald Armstrong

Jerry. morning, Good

Jerry Revich

about variants of far? it’s if in in you you at of new maybe the with I are talk the the share in do wondering what most And Can early products you through about battery about power customer but think call, could you I’m products see we’ll the beginning stepping appreciate that the are the that production were talk stages facilities? early, testing. successful commercial when your results? us you could so them various

Ronald Armstrong

Yes.

sort think, three of in layers. about think we it different I

is about think, for once demand. – of will �� feasibility I next and we’re sort and they where the of lot learning dictate in think I are all commercial customer how where ultimately, which us, technologies demand on. the next demonstration as a And be customers would of viability customer economic year. there, time probably about And good I step the some the point, the mean, these at technologies goes that starting it’s of work, new low probably phase would we’re be volume the some today level then production, at the

ready products. about we’re be as can to is when be and can be smart doing start to we’ll as be be ready those customers’ everything there we so, we technologies. the prepared production demand those And and for And

Jerry Revich

EV? Okay. can production like low what past And the you that’s PACCAR on scale Is next talk should done expected seen volume powertrains side guess, about the powertrain year, it tend to lower-volume it And least we’ve powertrain? use supplied looks is and in you terms folks products of wondering is in-house. then have you be thinking the that a diesel at early where stages the what is – the we I third-party? from more you’ve about in of the framework third-party I’m in you’ve

Ronald Armstrong

Yes.

the stages, a best, but we what working early identify want role in getting partners what think and with I about these of technologies alternative powertrain components. we’re in to want to work what variety smarter to we also have play position

still for long-term. studied being that’s So the and evaluated

Jerry Revich

Can And in that you that. used strong bit flesh just were to mark-to-market, PACCAR benefit margin or have It you a more values that excuse that higher? a us just sustained Financial, is the context contributor moved strong parts Was had – quarter. improvement? you this margins truck give values really behind now or Can folks sounds FinCo a me, like out? that

Ronald Armstrong

Yes, of valuations at take our the quarter. write-down forward. every used And that there’s needed, adjust we a look then the inventories truck going there’s typically, We write-down no basis and just mark-to-market. becomes if we once

we’re a market all better pricing – it’s North result enhancements, about America. mark-to-market activities, no the in used particularly So truck getting better from our is just and

Jerry Revich

Thank Okay. you.

Ronald Armstrong

you. Thank

Operator

ISI. with the comes from Raso question of next Evercore David Our line

is line Your open. now

David Raso

much. you very Hi, thank

Ronald Armstrong

morning, Good David.

David Raso

year-over-year. you quarter we’re geographically us Can the Regarding correctly, delivery help I first thinking heard how delivery up sequentially? XX% about comment, if

Harrie Schippers

last see probably compared – seeing first the as And Europe year’s America we’ll improvement North lion’s see improvement some that South quarter. yes, with we’ll in think some in well. of will America in to as I – well we’re share be

in as I the So I up be will up be most Mexico, of well. think, think, will regions

David Raso

while, looking to rest haven’t Yes. little supply it, kind sequentials, at America. driving the most the on that’s this normal I’m XQ, usually world North a so it guess, the found I XQ of you of are growth for chain of constructive what improving? is sounds Europe just and was like And down sequential

Ronald Armstrong

It is.

David Raso

the in couple cost. rather of appreciate I believe quarters. chain So inefficiencies the last have to have the the supply been price I notable

see do So little I margin point, I’m get is North I guess, to down on America trying growth, quarter maybe chain have at on improvements the with past, maybe gross sort the bump a starting grow able stronger to some the thought growth? a if of can first that just in to up still in sense the thoughts? gross margins margin pushing that the year-over-year. the gross driving we would gross the delivery supply especially of, margin bit have I’m the just

Ronald Armstrong

Yes.

So margins, in about XX.X% fourth look I – truck at the margins quarter, you XX.X%. truck think, we’re if XX.X%,

margin related quarter And first effect revenue a to the impact. the so, because be that than of parts, you a trucks get will has growth more in bit mix a

and of we’re it sort how – seeing. that now, right upside. good performance by we’re could we’re that’s the suppliers of there continue making on and – ensured we really based be see in our month currently. some And good that So But our what seeing best call January if that

David Raso

No. that, I yes. appreciate

we’re a extra have margin, are at year-over-year fourth chance level That’s year-over-year still little some start chance, looking start truck was truck we We assume the a in margins saying the year-over-year improving to But least, what with Can pre-tax earnings power. a the to should for down the you deliveries? say, pop margin? on have there’s growing quarter. that pre-tax to

Ronald Armstrong

It could.

And first things as we’ll how so, through I here – we’ll quarter. progress think see again, the we work

David Raso

I orders down us the in the quarter Europe. derisking with bit. And were you the appreciate help year-over-year? on a quick little But Okay. follow-up the a can guide fourth how

Ronald Armstrong

Europe, in if Let were the can we while orders the and… numbers. just strong look really we strong – had – for We a me December

Harrie Schippers

X%, orders were full-year, up quarter Europe. the for XX% were orders fourth in and Yes, up

David Raso

right. all Okay,

X% year. into the So it’s up going

Harrie Schippers

Yes.

David Raso

influences in if the fourth about a And how just think you step you Maybe was help the quarter. it us thoughts nice maybe lastly, your how can repo? the repo. the share cycle The up on repo and

Ronald Armstrong

is currently, efforts we our as the when the – we repurchase mean, on step valuation it is I up activity. attractive Yes.

been that. approach continue through that’s manage authorization for we’ll the have still we’ve apply will taken to years so that We to $XXX million and of continue And XXXX.

David Raso

Okay, much. you I so appreciate it. Thank

Ronald Armstrong

Thank you, David.

Operator

from comes Weber next Our with line of RBC. the question Seth

line Your open. now is

Seth Weber

Hey, good good afternoon, everybody. morning,

kind there Is fourth the you fourth cost quantify David’s was question on or the going supply basis maybe how disruption margin onerous get of quarter? in anyway and I the Just margin. the back think, quarter? quarter. you the hiccups in much points said to Did to third chain gross some it in it less XX

Harrie Schippers

a tough many one. Yes, that There’s inputs just so that’s go with that.

So, I don’t recall specific. that being that

and it’s to – hard an is it’s So but quantify. it impact of millions, it’s tens

Seth Weber

Okay, higher to about that fair then XXXX. enough. looking ask you’re And I wanted the in CapEx for

You it did suppliers? any facilities. is just us sort that you – brick-and-mortar, of up any is incremental Thanks. adding give you or machine incremental I’m manufacturing are color mention side? part on on some you the tools adding are of or the And higher specific CapEx on that spending what? ramping spend wondering, also, just on Can manufacturing

Ronald Armstrong

bricks-and-mortar to combination of additional I’d a say, be efficiency. really added There those it’s of increase all our things. the to some So will some facilities

One in of new investing going doing, Ohio. in we’re that be be we’re a the to to going paint Chillicothe, things shop

more So current shop paint with involved and to that’ll sizable the redirect capacity. pretty assembly we’ll addition be be

launches efficiency the the and the to to MX We’re to looking just and with machining new world support engine product that. of of around the our increase at facility factories success we’ll to go all be preparing requirements also continue investments and for of PACCAR

Seth Weber

along of little investing them to bit a you days? – kind are in help suppliers help And these Okay.

Ronald Armstrong

to – supplier it’s going to enough is, We you capital are, can’t then definitely benefit yes, investment want to it there’s suppliers with and done definitely, get PACCAR. we’re do, we support what where providing investment fast

Seth Weber

Great.

guys. Okay, you very much, thank

Ronald Armstrong

you. Thank

Operator

Andy next Our from of Fargo. Wells Casey the with line question comes

line Your open. is now

Andrew Casey

Good morning there. everybody doing? How’s out

Ronald Armstrong

you? Good and morning, Andy,

Andrew Casey

Doing fine. Thanks.

Ronald Armstrong

[Staying arm?] [ph]

Andrew Casey

Trying, the common. worst is

us. You’re come out welcome to and join

Ronald Armstrong

Sunny today. here Seattle in

Andrew Casey

sales of That’s been I expecting industry you’re in European mean, have your some already down around Hey, the but questions the asked, X% at outlook, the midpoint. great.

expect You to necessarily we organic you trends the industry growth but read that in X% deteriorate the that Should to fourth growth order – not quarter. industry through trends of year? kind mean had PACCAR, sorry,

Ronald Armstrong

we the has we been market be fourth. things, for based see three could years. how on straight European We The XXX,XXX Yes. XXXX above think

so through year into it’s it’s we’re how doesn’t the that But we’re progress starting the do we case. the year. and – out But And our some conservatism it years we’ll turn positive see with have hopefully, thinking four vein a to at. as baked long runs. in be But where we real

Andrew Casey

Okay. Thanks for further then any Europe that, Have see in create region? And a select those just Ron. you that started topic. on countries little of bit any to that the weakness

Michael Barkley

the how could where strong certainly little just there’s of Ron place if in say and as obviously, in anything, is Germany UK. that a order But said, intake see You there’s general, the trucks bit and performance noise received customers. the we are being with the

XXXX. market achieved pretty feels and we’ve share order up that intake good for So growth

Ronald Armstrong

in fortunate UK. the pretty We’re

– won’t Europe of there competitive And situation, from plant manufacturing I think in things event our the UK, has We how in the actually that in into that provides with but us play competitive Brexit. it a plays and favor. hard there out product be that OEM a everybody advantage depending bit Brexit, only is, we’re on the have actually, a believes it a a

all but to So there. approach we’ll hopeful see a how it there’s transition nice the develops, we’re that smooth

Andrew Casey

on XXXX? can main improvement margin I improvement then it during around And clearly, what the you. a thank annual look on of strong year-over-year, performance. reflect look review to then you could factors entire you further kind flip kind year, basis back that driving When were? of upside the margin operating at points basis, if them Okay, XXX of over to And you the whether expect very parts, you an if had we

Ronald Armstrong

operating the thing the on marketing and spend. sales leverage So, big just the and is warehouse

benefit that. And get of so you the

part and don’t continue which engine You bit higher growth and we in engine part little – than have a going get average I margin, this change. sales, see our that’s to typically think to

we’ll parts develop see that XXXX. line help leading be – continue product to growth probably engine still think, the business will parts I us engines a in

last we is – PDC, up we and doing constructed running that, and So, year, great. the offsetting which Toronto now

you’ve we some got business going growth the incur so, just costs to forward. to project that the continue support And of

to but pretty pretty that’ll all a be tends that So – little offset normal. bit,

we’d so see And X% some – from some growth. probably to that leverage revenue X%

Andrew Casey

very you Thank Okay. much.

Ronald Armstrong

Thank you.

Operator

question JPMorgan. Ann with Our comes from next Duignan

now Your line is open.

Ronald Armstrong

Good morning, Ann.

Ann Duignan

had Oh, mute. on sorry, you I

step I bit versus particularly if operator, lot you can you. Sorry. But talk versus North backlog your sleeper be we a the backlog, my mix would about a look mix there in smaller guess, us little America, can Class questions Good the and the could or large you give answered. again, at a of owner been have Thank that of morning. any of take And in X? also other great? fleet maybe color on back

Harrie Schippers

And retail we’re also the if normal very that that got that’s try manage need. a normal loyal of trucks times we business, to And fleets where year pretty We’ve in that our to with for that bigger smaller supply look and the mix able the extend fleets, XXXX, they backlog business our lead a all a fleet backlog I at customers dealers. by

Ann Duignan

sleeper related kind gas versus X thinking I’m infrastructure… Class And straight, of nothing unusual and more oil

Ronald Armstrong

normal. very That’s

Ann Duignan

Okay, that’s Thank good you. hear. to

Ronald Armstrong

Yes.

Ann Duignan

industry about little same cancellations you’re talk you be If the could perhaps cancellations? been of what or last also, about with, would talk also stock there the so ordering context cancellation, bit for you seen good. to begin have that of months. rates, that a used couple and could that, for over values not cancellation level that you dealers not you’ve the the in then talk Can And about in what escalated

Harrie Schippers

of don’t Yes, nicely we consolations. see used have And see we lot real mentioned. we reorders. prices cancellations it’s truck if cancellations, If cancellations, for look as we at improved a

type the or not any dealer customer far. a but significant for changes cancellations truck, so the a So

Ann Duignan

canceling that assessment And delivery of industry your it that. cancellation rates, resetting train that the of is is more trucks and

Harrie Schippers

– into what we just don’t look numbers other know any we We we don’t know But our like. have really situation what is. competitor the the what – read

Ann Duignan

past it not in outlook. your we date? exactly assuming the you Okay. the happen, a one expiration or do quick the outlook for if order do that What it’s And on baked downside follow-up risk European normal You’re doesn’t what’s or get Brexit? have

Ronald Armstrong

there’s it’s producer be But standpoint, again, hard us. if an we Yes, to temporary there there’s sole competitive bit – the – I there’s bound it’s temporary actually because think, are a Brexit, of a that’s UK. some that’s be – again, a advantage bound in for disruption. to the some, From and

Ann Duignan

No. the long-term, disruption, any pulls But to obviously? in

Ronald Armstrong

Yes.

long-term, I out, yes, it think challenges. in but all there sorts itself could short-term, be

Ann Duignan

Yes.

Okay. I’ll you. Thank line. in I and there it. back get leave appreciate it

Ronald Armstrong

Okay. Thanks, Ann.

Operator

question Jamie next of Suisse. comes line Cook from Credit Our with the

now Your line open. is

Jamie Cook

good Hi, morning.

Ronald Armstrong

Good morning, Jamie.

Jamie Cook

obviously, when assumes look was talk talked at I your price of question, the over. about in multiple, XXXX. rolls first customers to when truck already XXXX, guess, I the we And sort surprised world market in stock starting about you the obviously

not I what customers constraints is far should sort be So sort of talking about don’t of XX.X% are out how I’m sorry, to in to we the going like supplier of low-end? can about But you more high-end and you wanted But they’re XX%. to X% going XXXX. thinking I the mean, I costs talk realistic to know are? XX% my are price, just said how XXXX then the the – just far inefficiencies you push get and away? your margins given out? the I just to And how midpoint again think, material I for how down, understand just terms second understanding you on I question, said,

Ronald Armstrong

the about their They’ve discussions in slots are engaging backlog, the customers got XXXX. So XXXX. for outlined build

some And so those of and… are discussions occurring

Harrie Schippers

requirements In XXXX. very so come. big still yet, haven’t still issued to XXXX. still very our we The for in – for limited it’s general, plan pricing XXXX But it’s fleets that’s

launch pricing more we once or for we’ll for XXXX. see XXXX, issue orders So our

Ronald Armstrong

Yes. for And margins… look,

Jamie Cook

the think XXXX, the XX% I’m just if whatever are down you’re what there too based have out you’ll forecasts view hearing, for business, matter you industry a or on you the what…? forecast on you if wondering run don’t strong no is market pessimistic

Ronald Armstrong

we see I actually in quarter see be and be what what how – plan. But trying will to XXXX, now, as determined. not build people to you bit to that’s are more trucks. little Yes. – right that’s figure want out delivery mean, – a need and trucks, that’s And we there’s it our we’re still first

will we’ll year, to better as broad movements feel far the just impact a and What’s cetera. how cost are be. year of perform suppliers margins, we’re range and tariffs, starting the have et pretty and for over going given As the commodities

all we’ll dialed as think we first quarter. we still progresses through that but well pretty that’s we the it have see So, – in, how go

Jamie Cook

back Okay, in get thanks. I’ll queue.

Ronald Armstrong

Thank you.

Operator

Our next question comes UBS. from Steven Fisher with

line now open. is Your

Steven Fisher

guys. Hi,

Ronald Armstrong

Hey, Steven.

Steven Fisher

quarter. Hi. shape of curious I I end they’ll the to you be I think, that wonder ramp higher – I’m to guess, production of fourth topic. I wanted to in meet to still said by that up confident suppliers the you’re the follow-up rate seamlessly good further And a on the a But Ron, supply reached able chain XXXX?

Ronald Armstrong

Yes.

some I are in few second-half – they’re our mean, of that’s closely few our with teams, last our had difficult teams And teams, materials had things working which behind year, a suppliers. and they Our to some sort – like – and got dealt of our hurricanes hands with suppliers quality purchasing that they the our teams, us. a

we’re him they’ve to legs build to with And of during XXXX. want their progression we be support closely the able that them so achieve so, the working under gotten to and

Steven Fisher

So in, is the January? so smooth far it month say, of

Ronald Armstrong

January seen couple it of we’ve has in a best been to the quarters. Yes. –

Steven Fisher

in and expect curious on was it or how at couple sustain quarter on a services, a Okay, rate much this of moderate XXXX, have And of $XX Is run current visibility so. something The that kind just of or then profit nice then quarters? financial at for here just to build million after might terrific. XXXX? you point you

Ronald Armstrong

year we’ve and Well, globally grown truck continue last the financed the next ability that we will additional of about XX% expect year. that record deliveries, we’ve those portfolio the and truck deliveries with

portfolio portfolio continue now, performing And to we’ll think, see I some So excellently. right modest is growth. the

really past historically Our are levels. low dues at

XXXX entered XXXX And our in at with Services so we we good so for for business Financial sure. where shape, good about feel and we’re

Steven Fisher

a Very lot. good. Thanks

Ronald Armstrong

Thank you.

Operator

the line next of question Vertical with O’Dea Joe Research. from Our comes

is Your now line open.

Joseph O’Dea

my questions. taking for Thanks Hi.

Ronald Armstrong

Joe. Hi,

Joseph O’Dea

year in the last margin when to to XX% strong back First, about potential. talk part when in another strong of XX% middle gross just you conditions And market and understand things margin the major kind market price to gross XX% front, appear potential? the obviously, the wanted decade structural understand doing you’re a wanted step on to just in you XXXX go XX% of in of cost emissions range a structural considerations. to sort down of range, host swings a to But that

Ronald Armstrong

excellent. days great have Yes, of revenue the The that over the years much cost trucks ago, but in unusual XX% XX think, occurred could have I side XX% to given emissions all are been we’re higher There and circumstances XX are these shape. years some ago, margins add-ons time.

to So have XX% percentage XX% whether or some strong. that realization pretty but the impact or could probably XX%, it’s on it’s XX% over time,

Joseph O’Dea

And vis-à-vis Okay. it balance just I to do bit front, but maybe potential up repo share sheet, share on why repo larger. on something up that’s guess, it stepping cash on XXXX, little the the a then the active be the And the not in and more step much front?

Harrie Schippers

– we really We feel just good.

point. basically If our about that minus cash setting of it’s or balance you look our time, we’re XX% plus at and sheet over

we shares where to we’re comfortable us at XXXX. And so opportunistically work with we’re in continue is to and will that for apply approach quite buy continuing and

Joseph O’Dea

on I towards nice the there? orders view and years kind to that about the gains timeline one of has the you think out timeline the and that momentum today – the a you that sort some what just trying have target. XXXX, – then share hitting I there than think, any mean, of in over on imagine XQ, DAF is about the in of XX% to think target have see get just past more good reasonable sense you I you progress you have When there And do to XX% it look couple in

Ronald Armstrong

Yes.

at years we progressed XX and history, years XX at to now look ago you XX% were XX.X%. if we’ve So

sights? So model for Absolutely. XX a finish year our XX this standpoint, key was excellent And standpoint, truck from that year parent reason standpoint. investment a and an success both was in that the performance is a fit

North America, XX truck share points to XX-year I just in America make we’ve it’s investments and better as gotten we’ve – for we’ve XX. the basically grown period, the future. grown So think better it’s from has And in North seen and that – just X in continuing to we’re

And so, yes, our definitely XX is sights. in

Joseph O’Dea

much. very Thanks Great.

Ronald Armstrong

you. Thank

Operator

question line Frohnapple Our the Buckingham Neil comes with next from Research. of

Your now line is open.

Neil Frohnapple

guys. Hi,

Ronald Armstrong

morning, Good Neil.

Neil Frohnapple

good vision morning. down the Can guys into the Investor of with provide guys, At about at Hi, Day, all as expanding talked further you you changed any potential here the China. the road Ron, the all commentary crosscurrents?

Ronald Armstrong

It Yes. changed. hasn’t

Preston that’s combination in return. right there challenge finding get that well the months. opportunity I is a last was China return. the a and several where can of window you provide travelled for can look to Harrie, continue We And reasonable the in

as open, And so the we do other future – just but and we’ll continue to it will we be window it’s area parts just evaluate and an opportunity continue there, of to it’s evaluate of there Asia.

Neil Frohnapple

and faster can then you All for American the medium XXXX. of North show duty an in to more growth right. life seems And provide outlook exhibit signs It market.

just thoughts are your curious yes, that market in on So, for what XXXX?

Ronald Armstrong

roughly is share Class we Kenworth XXX,XXX X is market, market in Peterbilt play of record deliveries, XX.X%. achieved which X where The record and Yes. and trucks And XXXX.

we great. our of we’ll more just products else, and and time we more are make like go continue And into goes to in have forward. that doing product the And that on, So investments engaged everything more as get more business. as dealers enhancements

reasonable probably so look pretty we And of XXX,XXX a as that we for XXXX, this approximation at think market is trucks year.

Neil Frohnapple

on. Okay. Ron. it I’ll Thanks, pass

Ronald Armstrong

Sure.

Operator

Cleveland Our next of the Adam question line comes with Uhlman from Research.

now Your open. line is

Adam Uhlman

Hi. Good morning, everybody.

Ronald Armstrong

morning. Good

Adam Uhlman

if Yes, about the you I was MX could wondering engine. talk

in growth if we in wrong? And think, or type on in but I I mentioned, you’re Ron out today, investment expect some business that production capacity. kind correct me earlier, online? maybe I production heard I’m XXXX? terms what Is you either machining penetration assume should of what comes maxed of of more rates adding that

Ronald Armstrong

Yes.

– XXXX. able coming we’ll those – So support penetration. be in XXXX the to we’ll probably and investments The start that’ll making is the – online increased

could will it MX and time in of that As to before, the the applications support engine basically just penetration. customer we more capacity. put we takes increase today had if We said XX%

think. continue And near-term XX% the penetration so I additional to and making grow the over that period, coming why we’re that’s to see investments XX%, we’ll

Adam Uhlman

in end we did And XXXX? where

Ronald Armstrong

Just XXX% the course, and Europe. DAF in North in that America. Brazil all XX for over of it’s get And, sold products

PACCAR, for PACCAR. of about And XX% all for so, I overall it’s penetration think

Adam Uhlman

in then there? truck of switch Eastern used can Europe And Europe? we And pricing kind changes you talk you. between seeing you’re Any is be could Gotcha. Europe then helpful? to what difference Western or Thank back any would and about there

Ronald Armstrong

pretty DAF towards go Not for steady. pricing Central Central the of markets. leader is Yes, more tend big – European appreciation, seeing steady. is area and for Eastern demand in the DAF also pretty growth Europe. the trucks but to just a used That’s And trucks. any new

that’s is think about that’s And XXXX about thinking at steady saw point. we’re XXXX, goes would I how it, she how in we what this so as that’s

Adam Uhlman

Thanks. Great.

Operator

Group question from comes next the Wolfe Our line of with Scott Research.

Your line open. is now

Robert Salmon

Hey, good Scott. morning, good afternoon. It’s on for Salmon Rob

Ronald Armstrong

morning, Good Rob.

Robert Salmon

on in we guidance XX% provided the emission you out look In thinking guys. about of roughly that a budget. growth as that in you And if at do flexibility into guys you kind a line midpoint, implying the be R&D few the investments in products? we the some Could under downturn the new what’s how some XXXX? encounter morning, an trucking as guys as little well industry years item, changes, should the the of standards Good you making R&D are of talk it’s of we kind that about have light

Ronald Armstrong

really got That’s in those making powertrain make in poweredtrains. we’re manage in But flexibility in continue the and as is would more great to some do cost managing we being strength enhanced we’re and for also, investments and investments quite PACCAR, is see of say a the to I that the intellectual our being making there can markets. requirements created – real good investments We’ve side. of Well, we’re incrementally, on where and diesel seeing emissions of going R&D the strong we we software all development the structure alternative we’re always investments well. property products future.

the we so arenas goals new to market talked we to And share in those are products earlier. of invest get us that that the continue in those future to about going and

Robert Salmon

sense. makes That Okay.

XX-month orders a the XXXX, is be With record produced of more delay to in it of ability given as just the pricing, firm that when truck the a make today? that you to much roughly well gets ordered of looking has kind any given we’re when kind backlog, terms as at throughout

Ronald Armstrong

has value negotiated, bring and to and great our our that agreed, been that’s pricing products our of market price the customers. The representative

So it’s set. pretty well

Robert Salmon

That makes hearing as customer sense. here. end your from That’s what we’re well

So the time, I appreciate guys.

Ronald Armstrong

Sure.

Operator

next Our line Tiss with question BMO. Joel of comes from the

now is open. line Your

Joel Tiss

I Lovely, stay guys, too away. much can’t

Ronald Armstrong

Joel. appreciate I it,

Joel Tiss

outsource talk me that just whole autonomous. that there’s your to like parts or you to Are you give I of that, wondered bit that there a of are how that you if guys you you’d little about that on regard could just sense take that? or approach a guys of, little – going thinking process, thinking are in control about

Ronald Armstrong

Yes.

who a autonomous We’re still We’ve working quite through worked are developing with companies few technology. that, Joel.

capabilities. we’re but them, our developing also own with partnering So

on specifically Innovation have Valley – We and for we’ve software own focusing our engineer a hired capability. level Center developing develop our Silicon

on, developing alternative property with on we out figure trying and the And want again, to very capability. to we’re have sort to others like we where intellectual that where powertrains, of partner want focused so,

Joel Tiss

you. Thank Thank already. else you. Okay. been has Everything asked

Ronald Armstrong

Joel. Thanks, Okay.

Operator

there time. this There remarks the at from are queue Are questions any no company? additional other in

Ronald Armstrong

We’d joining operator. like for the thank and call to thank everyone you,

Operator

Ladies and gentlemen, for this concludes PACCAR’s earnings call. you Thank participating.

may You disconnect. now

We use cookies on this site to provide a more responsive and personalized service. Continuing to browse, clicking I Agree, or closing this banner indicates agreement. See our Cookie Policy for more information.