PACCAR (PCAR) 23 Jul 192019 Q2 Earnings call transcript

Company Profile

Participants

Ken Hastings	Director of Investor Relations
Preston Feight	Chief Executive Officer
Harrie Schippers	President and Chief Financial Officer
Michael Barkley	Senior Vice President and Controller
Stephen Volkmann	Jefferies
Andrew Casey	Wells Fargo Securities
Joel Tiss	BMO
Jerry Revich	Goldman Sachs
Ann Duignan	JPMorgan
David Leiker	Baird
Steven Fisher	UBS
Seth Weber	RBC Capital Markets
Ross Gilardi	Bank of America
Jamie Cook	Credit Suisse
Courtney Yakavonis	Morgan Stanley
Jeff Kauffman	Loop Capital Markets
Joe O'Dea	Vertical Research
Neil Frohnapple	Buckingham Research
Robert Wertheimer	Melius
Rob Salmon	Wolfe Research
David Raso	Evercore

Call transcript

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Operator

Good morning and welcome to PACCAR Second Quarter 2019 Earnings Conference Call. [Operator Instructions] 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. Ken Hastings PACCAR's Director of Investor Relations. Mr. ahead. go please Hastings,

Ken Hastings

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

listen-only line mode. any prior members ask of participate conference in on media with a As that the calls the we

Certain will economic risks competitive expected today information uncertainties conditions and affect involve presented and forward-looking be may including and general results. that

additional filings in For the paccar.com. our of page please information see Investor SEC Relations

like to now Feight. Preston would I introduce

Preston Feight

business Good Barkley you I morning. PACCAR's update Schippers, will and Michael highlights. results excellent Harrie and on second quarter

very our passionate of foremost, First trucks exceptional the quality, am and providing about services highest I We're and world. highest performing customers, our the employees. in proud

analysts in the May. in to I participated our who want provide to opportunity PACCAR conference investor our The update an thank business. also on in York team those New appreciated

PACCAR sales after financial of and tax services a of and on resulting net billion income return revenues. $X.X quarterly excellent $XXX X.X% achieved million revenues record in

of of revenues compared increased record billion generated pretax second $X quarter profits the to Parts PACCAR and profits record year. $XXX and revenues Parts X% million. over X% grew of last

lower increased PACCAR Europe. North strong second the performance. year. of partially by the reflects build record driven higher operational than gross a truck trucks XX.X%, in by PACCAR parts America, of robust second margins and aftermarket demand Parts in last XX% offset achieved and Other Truck, record This build quarter, deliveries, quarter during delivered XX,XXX

are half Canadian production industry customers next and Peterbilt’s first year. and for the Kenworth delivery schedules high. backlog of US remains full X trucks ordering with XXXX in Class substantially The

distribution continues DAF to future in and In honored of PACCAR Europe, annual operating margins reinvestment the the XF provide truck strong of year year-to-date operating shareholders achieved the growth. an market fleet has XX.X% flow and UK. resulting DAF in to the for for was excellent share excellent as cash in

PACCAR half dividends share. $X.XX declared and second per share per dividends $X.XX quarter first of of

half The every were of annual delivered XX% period has year in the XXXX. than same has in income dividend dividends declared and First the XX% year. since company dividends for last higher to net dividends paid many years of a XX% range

million current increased during of years. its XX has shares of Board per dividend XXX,XXX We quarter during PACCAR quarterly the Directors average the stock an of authorization. the XX% remaining repurchased in a $XXX second year with last

future to million PACCAR electric enhanced aerodynamic growth million of cell and truck driver fuel $XXX is of investing and in truck million powertrains, connectivity. with $XXX $XXX expenses R&D zero million investments These will $XXX year. advanced hydrogen assistance capital technologies, integrated this systems expenditures emissions fund models, and to

are and We Chillicothe, operating the state-of-the-art and new a increase At enhance will facilities. also lower cell constructing robotic facility, distribution which capacity. are paint build costs, Kenworth a new enhancing we factory Ohio cab and added our quality manufacturing truck

we’re engine, MX machining plant. in Columbus, engine PACCAR popular the adding Mississippi the for assembly demand customer increased and meet To equipment

vehicle We the customers. the in our Eindhoven, for recently R&D vehicle centers, opened two one solutions Netherlands. These Washington centers of in will global and one The development Kirkland, software embedded connected in and accelerate PACCAR software

and third North than of in deliveries third to will the Europe, will shutdown. build quarter, to in week summer delivery reflecting higher the the America In be lower X% year. quarter normal rates last due truck higher Global X% three be higher

will XX.X% in be company. XX%. We strong for XXXX to a range year forecast margins Truck, outstanding quarter remain third Other gross and another for the be to of Parts and

Services. Financial an will provide PACCAR markets, now update Parts PACCAR truck and Schippers on Harrie

Harrie Schippers

strong wages Canadian X.X% job X estimate year-to-date. a Preston. Thanks, US and Freight has helped vehicles a business and to investment. increased US our to is XXX,XXX XXX,XXX range markets, of year. economy raised Class this tonnage healthy shape, industry growing We’ve truck by in of grown a sales good retail

period high and backlog, historically customer a robust production demand, demonstrated of sales. by in retail We’re the levels truck

US backlog XXX,XXX of and The trucks end of backlog June. at X the and Kenworth Canada Class Peterbilt’s industry. XX% represented was the

to year. are tonne raising above are XXX,XXX XX growing European rate economies year. at European to last XXX,XXX of We a our The projection market a this vehicles lower range than

over steadily income and half has PACCAR of Parts of net PACCAR shares trucks truck PACCAR part the the XX $XXX record annual achieved its DAF Kenworth, million. profits delivered $X.XX PACCAR of revenues $X.XX operation. billion. market [ph] truck has years, growing engine and in engines large record pre-tax Parts resulting in of record first first X% over and increased last growth billion Peterbilt revenue a This driven PACCAR half years. and greater and number

generates all business cycle. consistent profitability This the margin higher phases in of

parts the Vegas, distribution parts centers Brazil. Las with under and Grossa, business in construction We Ponta Nevada continue invest new in to

We full expect grow X% the to parts X% to XXXX. sales for year

trucks. of Financial demand This Financial XX% DAF, to earned performed Peterbilt quarter the Denton, and support PACCAR Financial truck year, last will centers for portfolio second second quarter higher pretax well. solid year. than and million, PACCAR in Republic Texas $XX Services Czech open Kenworth income Prague, customer used The PACCAR

sheet. worldwide. who strong I greatest financially store the locations independent balance appear to than and and TRP Peterbilt more am service One operate sales, of Kenworth, XXXX the DAF referring assets PACCAR's on does not dealers,

truck reflect Peterbilt the premium leading brand Kenworth, and dealers DAF image Our and of trucks. quality industry

industry. proud our They dealer are We’re of in network. global best the the

answer to would We questions. your you. Thank pleased be

Operator

first Jefferies. Our question Volkmann with Stephen Instructions] comes [Operator from

open. now is line Your

Stephen Volkmann

Hi. everybody. Good morning,

Preston Feight

morning. Good

Stephen Volkmann

make you wonder for could I'm of kind your of what course order some if overall a end the rate visibility. few market obviously, quite orders to XXXX, of half And you're the I more come of of a but about first get you comments thinking is I has sort Harrie, taking about said down bit.

because Do from hearing relative what of you we get customers things freight you're as you season? of caution your the into think are Or come in again rates kind tick up XXXX? just seeing have demand down. curious order fall hearing selling trends in in I'm And kind to

Just some quality of order? kind thoughts the of the about XXXX

Harrie Schippers

at if America. we’re like the for line in good we the see and look North build North and backlog increasing in in orders today. So backlog rates really America market in levels said, And is the it very Preston shape. are you backlog the Europe, production today, as we’re our normal with the

Stephen Volkmann

Okay.

of Obviously, sort might of kind So decline? thoughts do about a market for any you look is the big have what preliminary XXXX like? primed

Harrie Schippers

get so next comment it, we typically on for that's the once XXXX closer to We probably call. something

Stephen Volkmann

worth in on I sneak Can might what to more kind you’re truck of the figure relative one I it in a environment? right. be pricing try. new just All seeing

Harrie Schippers

Yes.

realization in the I'm to in we pricing say As we by look going second costs. a couple of at offset saw largely trucks, quarter realization percent, the price

kind with each And in so balance other. that's of

Stephen Volkmann

you Thank Great. much. very Okay.

Operator

comes question Wells Fargo Andrew Casey next Our from with Securities.

now is line open. Your

Andrew Casey

Thanks as a well. lot. Good morning

Preston Feight

Good morning.

Andrew Casey

I and have Europe? a X.X% you outlook of QX. question between went the on Was on than difference quarter QX predicted a entire gave last about X%. It the different the little driven X% the up in It's by short actual to shipments. from term that

was can you And guess, And also, year? on Steve’s color maybe then, compared around market the development. what describe to order I intake if some so, piggyback last question, overall European your to

Preston Feight

Yes.

this we offset see did - what and look at as growth at the America that although, highest we've in little bit we the level, just year North by start experienced a in So, was, said, Europe.

build have and intake really good balance our between right rates. now, We here, our order

which fact, And well. got that had XX.X%, the up in at share record set we've if market year's really So first XX.X%. above is last half you results, we look

So are I matching doing nicely for that with that's what set we right up kind now. see And build right very of intake, order into us as said, we now.

Andrew Casey

And much line both segment cases. – and at on for. you. down specifically despite just revenue then what Thank points XX in from looking and in were the looking But seemed basis Okay. flattish, you higher pretty maybe to margin QX, then it with up the year-over-year truck be

been some ability growth? limited you some realize, headwinds the margin terms done that Can now segment’s what the is that the of the revenue to that on elaborate might quarter of leverage have in better maybe,

Preston Feight

Sure.

it I feels strong. the very in with look think you XX.X% if if – you gross it at margin, start overall – was

So when a truck standpoint, that. been onto hold year-over-year it to we able from at has look

at I operating high think, it's the it reason because a doesn't see already very movement up significant is level.

we’re in a efficient at the So point very gross margins.

do talked only quarter QX two. And sequential it then, I a the quarter has QX really if customer and and about with little you one think happened mix between a just to difference from bit between that's standpoint,

Andrew Casey

Okay. Thank you very much.

Operator

comes with question next BMO. Tiss from Our Joel

line is now open. Your

Joel Tiss

How’s Hey, guys. going? it

Preston Feight

it How's you? for Really going good.

Joel Tiss

third just can just a here. window give All instead about quarter? fourth be right. schedules Steve little to an production second half the Can so a for have idea, I second sort the wondered, talk bit production we maybe quarter. into of to just a of And of us small you and try

Preston Feight

– And where half. we got we we now. in then, try is to Europe, America the second second again, talk I right we Well, half, terms have, it of up about going if in think stable North it

second like would feel we through half. we So are those expect what to see balanced the for

Joel Tiss

America sounded incremental beyond was there mix, running you’ve strong, so Is kind too there factor or is of reading is Okay. margins all? a customer am negative XX%, XX%, America, margin? at in into it – at then or maybe much because in The like I the any not North that. Latin any And that been but there XX%

Preston Feight

I the of a not that bit small to us. much business a still, lot. didn't mean, weeding to it, Latin really it of there is but factor America there's have little percentage a benefit is so

Joel Tiss

can the then any And so there to you Is XX%. that? high? up that last, Why add Okay. is receivable’s just color

Preston Feight

the been in the primary rates that. build of Increasing driver has

Joel Tiss

Okay.

So it builds. than just more seems a up lot like it's

Okay. much. very Thank you

Preston Feight

welcome. You’re

Operator

from Jerry Our the line with Sachs. next of question Goldman Revich comes

is line Your open.

Jerry Revich

good afternoon, Good everyone. and hi. Yes, morning

Preston Feight

afternoon. and morning good Good

Jerry Revich

match adjustment I to expand the the And you we X% am comments that in third income European wondering was would Europe. that take you XX% if adjustment production quarter on down about When the in on could sequentially took as for order production think quarter, have place? production you that rates. seasonality your in normal could

So right to than production entering third Or that production quarter normal more coming the sequentially X% we should normal are seasonality? at down is rate? on point the XX% we see that where

Preston Feight

happened they made that share they we again still quarter throughout the in delivered second excellent the were adjustments we and market this and So saw. quarter second the just

so a summer build effect shutdown, the is good three do quarter looking third we daily But From shutdown, normal the a standpoint a a week rate forward, market. we’re in have summer overall position. from there an is which on

Jerry Revich

XQ build-to-order production adjustments see you the typically folks versus flex, you level North XQ, And and America, full you’ve so we with had when market backlog we of imply know sequentially folks that from scrub Okay. build dealer in when a that comfortable that does and folks obviously inventories? are are raising you rates in are first, you’re

that just dealer for through opposed are specifications confirm and have some XQ deliveries customer you Can firm to point expected typical them what that as specs?

Preston Feight

nice think I did you it. really job a of

orders sure order backlog. that And that think make to actually through and do, industry as we we is backlog look of And and backlogs there have is do Harrie for we still said ours. the we I XX% see build-to-order. the do clean there strong we that in very

customers. to run make want businesses. They the get we the the to we so to need trucks sure the trucks And that

manner And as building for as so a them. quickly we we’re can in of

Jerry Revich

we of level the dealer you And outside calibrate of have. terms the in that inventories, of industry statistics can just

mentioned backlog about a what XX% You backlog inventories? were of out of

Preston Feight

numbers So if PACCAR it's the at industry for the America inventory of for X.X. months they're North and think X.X you in

good have very So a we with in position dealers. inventory our our

Jerry Revich

Okay. All right. Thank you.

Operator

JPMorgan. from of with comes Duignan line the Our question Ann next

Your now line is open.

Ann Duignan

Can choosing closer Hi, on flat, have seen deliveries tachograph deliver? the how forward ahead I'd registrations pull the circle your we the about you of to there maybe a Europe, are requirement? mean anything discrepancy, to I you and back unusual Or year-to-date are are is slightly mid-year in of to year-to-date. going up versus to marketplace up XX% everybody. like talk registrations basically

Preston Feight

Ann. I think you it actually nailed

on is XXth. tachograph of the what's front remote biggest that probably June orders in the think I put impact forward

what and to the we to XXX,XXX And half XXX,XXX that's the first so market be really our market And able we still excellent expect rates share from truck saw. half range. and the And second for have in should build that. with we

Ann Duignan

that and again to Brexit in announcement the concerns just follow-up the UK, the it hearing Europe, that a does the have the are today you little sounds there new that over the of And like just reaccelerate bit and and impact we freight whole given the on definitive? in closer terms as leadership as industry or on it's that get the raise more could now end to year? What of a on

Preston Feight

Yes.

are leader for in the is So the the we things nice UK. us one of market

is the great all Europe in have We up UK and job a specifically. our also share Europe around and up in

So our truck might Brexit, with as in what look a models all the do at great we manufacture UK, in the U.K. that happen advantage we have we for

So manufacturing goes. of know will based is take the but it our really either don't with what way to be, well advantage positioned I outcomes it in Europe PACCAR

Ann Duignan

meant I might what any that? economy, freight the more just broadly on it and European on impact have comments whole

Preston Feight

great. in of the answer Yes, else. has surprised and I There I how the that year. know don't strong first with half in anybody any been better we've UK the would that been been that's than think first we have the demand performed half say customer pleasantly

Ann Duignan

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

Preston Feight

Ann. Thanks,

Operator

comes with question next David Baird. from Leiker Our

open. Your line is now

David Leiker

Good morning, everyone.

Preston Feight

Good morning.

David Leiker

kind talk inventory you between counsels effect if I backlog, orders, triangle can this in wanted to throw of there. about

North we’re what have the order here through backlogs elevated. remained is going fallen, rates Now the in while have America

I'm period earnings of I remained you sure bit rates may if might little change orders And numbers? through of elevated. the wondering economics, that a these we’ve where see the falling am order as not through the flow gotten lower ever a backlogs

Preston Feight

I what XXX,XXX keep bigger happened the to think in last is need just one mind last picture with year. industry year thing orders you

and a that a through that’s for things. to while it normalize So big takes number

are performance well performance. going our doing and our on trucks. it's financial love financial customers have great But the really effect got dealers not and to an our We've

and so, well those results will the And continue to be work things solid.

David Leiker

parts more I of from and take exporting are mean, than Europe world markets areas just those lot particular Great. on customers lot feel to to worried as - markets over your Any a going I'm the And of also. of Europe a other that out others? of or well? there those you

Preston Feight

we think us. I trucks have XXX,XXX range Europe for mean, XXX,XXX I has this year market share. that obviously, gaining to us done really of well the and

would about row So fantastic year and it a XXX,XXX, this that's in a size. be if the like this fourth market stays

team, the job a DAF business. doing teams, of the dealers growing the all employees, great the are the And

economy customers is the trucks think, I love well. the working It's fuel and outstanding. really the

David Leiker

Okay. Great. you. Thank

Operator

next question comes UBS. Steven Our with from Fisher

is line open. Your now

Steven Fisher

Good Thanks. afternoon and good morning.

Preston Feight

and good afternoon Good morning.

Steven Fisher

are XXXX the got going time what place year? to why compare And orders fundamentals higher. take I be level so, softening? following guys Steve much have if that it's in you freight for guess question, orders typically the to taken How back that's are do for I rushing year to assume - why the guess this the if of Volkmann's customers are I to of you at

Preston Feight

it I say Well, would this way.

in. full, But there is there's that you’re year just in in of order see to XQ current might the As XQ that's higher lot question, XXXX see I'd surrounded a probably since XXXX. you do get market, first of interest typically say, a part about than we in it. and for more intake That’s part because activities the we your see we filling different large substantially

think that's go to. And kind I where so of people’s just energies

Steven Fisher

little they But out freight see waited is going go? the of fundamentals to just with softening, the bit wouldn't rest why to how a year

Preston Feight

tonnage think have do, America. I think a May was right? I freight great ATA growth some truck North X.X%. GDP We in through are economy people really fundamentals occurring, is but mixed, up

spend like a a our team there's lot badly. and of our dealers things So customers. are to employees And with as not going talking we time

are good a doing job. Customers

out and see really cases. they strong of lot earnings are a reports the You companies’ in coming truck

for optimism So, there’s reason too. lot of

Steven Fisher

costs it a And was down percent be sounded would of like may price offset price expected that be quarter. so it. which quarter. said the the to in couple X% down. first cost Got you the It said from or you then have I coming

pricing the was should coming going moderating? here? that why are guess we I costs actually be So growth down And forward expecting

Preston Feight

you Harrie, your want color? offer

Harrie Schippers

was increases aligned customer cost mostly that said, more mix the or It's just like it's pricing less. Preston with

Steven Fisher

customer between was difference that QX QX? what mix and And

Preston Feight

and So, at the small stock are the we buys in their of a first look customer more of distributed those lots and trucks a quantity the lot lot on quarter. customer mix is in get quarter difference dealers into then second

the stock there's come in. orders, still customer low then just orders to but there’s the So, large-sized

Steven Fisher

guys. Thanks, Terrific.

Preston Feight

You bet.

Operator

comes RBC question next Weber Markets. Capital Seth from Our with

Your is line now open.

Seth Weber

to morning, back. everybody. wanted Hey. I just go Good

I previously of Is X%. your X% think guidance call you the Thanks. the can the revenue for for growth you was top anything saying there parts think X%, it this end, moderated is I year to causing now sort out moderation? X% there that to you're

Preston Feight

level. like perform the new to parts that investments is fantastic. say the for Grossa, to and Yes. distribution growth where the that really at any way business Vegas their through initiatives we continues look are The really X%. Ponta the fantastic. moving a e-commerce in doing with to reason X% TRP at we really high the pushed a team into Brazil, effect in Las business It centers Take opportunity currency and and things as going is adjustment is Sure, is and only

Harrie Schippers

It's into dollars euros translation. in a fewer we that do Europe in translate the revenues when the

Seth Weber

That's just that sequentially. you. margin actually is there? The we you. run there And of a rate then quick going that came the sort helpful. you'd down call And forward? Thank Thank of should anything follow-up. out think Is maybe FinCo

Preston Feight

don't I actually new the we it's it's I so. generation, think quarter-over-quarter. think - business don't up at when look

more team is So you're really talking that about the But it's doing portfolio good. about.

to in fantastic. the the the and doing quarter, half million earnings went to per it If it's first look just $XX at up $XXX you million and

Harrie Schippers

Yes.

Seth Weber

Okay. very guys. Thank you

Operator

comes question America. Gilardi of with next from Ross Our Bank

now Your open. line is

Ross Gilardi

a truck that back? what the of would rematerialize came the of wondering months trade you ago what do couple just started are market was Mexican seeing Yes. some and tensions you Thanks, guys. if to I in

your given in exposure of are perhaps exposed any lack think supply, Mexican order customers behind your ordering overall to strength production? production seen? you’ve other In of to you competitors more some of just do PACCAR because North given footprint your of greater words And surety the is relatively there's from America being relative share more Mexican

Preston Feight

I job think in a team good the done just Mexico down there. really has

We latest trucks fantastic introduced, well the generation by customers. the we've are trucks. received great the Obviously, have were newest

their share recent if happened changes good. middle year. exceptionally at And so, emissions the the was you in the And of look

that. don't But buy going by doing Canadian intake trucks our well. So think And build of affected Mexico markets. for positive it's really production think and domestic there obviously, U.S. in is I where order then, local people build a strong even can since has quite and trucks. in ahead the can to been make We we're Mexico. we,

So I it's works great think about affecting think manufacturing trade a and well don't we more I I just that, anything that have tensions is and think, people. great about footprint trucks there

Harrie Schippers

is I some And the of capacity short-term for back put you guess, Most if to that's feel you just sudden, produce market, point. the the see that do you in you market Mexico tariffs in like all of have very of and basis? place, Mexican relocate in did US a what a come sufficient correct? into actually production

Preston Feight

do capability. Yes. that We have

Ross Gilardi

the trucks it little I the if about you bit that. that you're about then, I'm wondering shift with adding you more in Are a if selling? I heard MX engine think, capacity comment right. And Okay. Mississippi, talk share towards engine seeing could you more a And made

Preston Feight

are demand for I high The performance. economy seeing outstanding People customers just providing, engines, MX time obviously those to XX doing strong and well. think, lightweight to now. and from for MX-XX in used them engine, fuel market our really space. They their the we’re had And are get engines

second be engines finished increased that we've and more end the in of increase to in our our capacity and going the quarter customers to Columbus for second able some capacity the at recently build So half. just

Ross Gilardi

it roughly how say Columbus? capacity in you've you increased Can much

Preston Feight

of It’s numbers. been meaningful, but kind it's XX% XX% to

Ross Gilardi

Got it.

where Okay. had on the could there. last obviously you've explosive markets us over pretty maybe Brazil, on you growth Thank I share? lastly you. years. And comment you just couple Remind are of mean,

X in target get think to to X the XX% from I years. And to beginning, the was

do you next start with Brazilian line As you closer in the of more grow get to that to continue years? to the in couple market number,

Preston Feight

customers durability the I a trucks the well fuel very, and Well, our DAF for the dealers couple they're and down performance they trucks, Brazil providing just was very get, Brazil. customers. economy and the of with are really ago in that months in there excited are reliability, working

our continue standpoint, share enabling that's in year-over-year market investments will bit continued growth. to a just a So is make it Brazil. and grow, From up to continue

doing distribution in overall of support Parts the there. new in XXX,XXX And Ponta Grossa, really the is Brazil. center which Grossa, center will middle distribution in down Ponta business building is market well square-foot improving In business growth. the a

team the So the they're and really bringing, dealers efforts good forward. continue about The now success going down the our feeling business has with there. just is made the results to how

Ross Gilardi

Thank you.

Preston Feight

bet. You

Operator

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

now is open. line Your

Jamie Cook

assume sense same Hello. should more question, helps engine content my higher. is be trying a assuming I the there time this over year, regards forecasts if are XXXX correct relative last your on then should And is, guess, - can one obviously, if argue next integrated quarter? just - the vertically decrementals us you just costs and one specifically, quarter visibility to just increased margins, would I'm the you parts in relative to am the in I anything cycles are there, you I could to industry business, question walk degree? consider quarter, at to what to through second that structurally it's have second previous the what is R&D with MX we your understand

Europe in us if could the anything shift you one help the be there's are – meaningfully with? decrementals out Thanks. And U.S? versus is So then different the

Preston Feight

a I we’re is intake, XXXX a can percentage From higher I the as sure typically. lot seeing right we of I for in I'm earlier, it get there, than that think questions order There said not do you. Sure.

compared means, to that comparatively We [Technical have but years. normal feels to it previous positive visibility Difficulty] great

to margins, all going the and market think And they I XXXX. and really overall as what it’s we're the bit in little operating talking is said, effect about that overall those our is is decremental our costs and Harrie in I'd a XXXX see margins full be, the stateside. – means size end on margin or say to up or we early the say, decremental an incremental to we going that or market what effective be From think relatively margins continue provide low, good shifts margin incremental we value margin being, may that keep I minor to from to

Jamie Cook

Okay. reason But the no meaningful I difference decrementals relative should… line is just, that's be but Or if structural right different to in previous there downturns? better? mean, I question, any you're would are top decrementals mean, why on a incrementals

Preston Feight

so. think don't I No.

Jamie Cook

Okay. Thank you.

Preston Feight

You bet.

Operator

comes Morgan next Our question with Yakavonis Courtney from Stanley.

now is line Your open.

Courtney Yakavonis

Thanks. for question. the Hi. Thanks

going back on this question production to Just your Andy's quarter.

all of forecasted North it was and be pretty I looks the originally evenly America increase you had would other. and think like between kind it North from that split America

at know we of your expectations? I is your to line production your America that. but just discussed in kind why with So once, confirm North wanted

Preston Feight

Yes.

was with American expectation. in North Our production line

I think we slight build any market. adjusted the in Europe was there only where just was rates change made got sure our to we the place where

So effect. overall that's the

Courtney Yakavonis

quickly sure, a faster than projects more new moving about? that Okay. be should [ph], want lot projects just it's this done is on to any Got then waves CapEx quarter there last thinking expected? to Or And similar or are the just you. where make of getting we

Preston Feight

fantastic and mean, seeing But terms that's parts making and changes. used centers you're trucks. I in are these opportunities the fun, our for quality great and the CapEx the really why that in we're we so for have capacity factories, of future in really distribution our company, our Sure. just investments It's some

investments that importantly for in are creating. is And then the we long-term products maybe the most new benefit

so moving is lot bright and a a future And we programs building they're successfully really for going think us. on there of And along. it's

Courtney Yakavonis

there. in And that I maybe your wanted guidance reduced America just how compares. then confirm to think slightly you Okay. I and just you. Got finally it industry South

wanted to to guided dynamics there? the you XX,XXX, XX,XXX play Brazil up understand last think at I just quarter to had

Harrie Schippers

I don't as last the think what we for Brazil guidance time. the is did same

America, have dropped South total for think might I range the X,XXX.

– from think a So we’re now… I

Preston Feight

for to South in total. XXX XXX America

Harrie Schippers

it's outside Brazil. but Yes,

Preston Feight

America at still XX,XXX to midpoint, is South XXX,XXX. guiding XX,XXX, Brazil to XXX,XXX as XX,XXX a

Courtney Yakavonis

Perfect, great. Thank you.

Preston Feight

You bet.

Operator

Our question Loop from Jeff comes from next Capital Markets. Kauffman

now line open. Your is

Jeff Kauffman

Thank much. morning, very everyone. you, Good

Preston Feight

morning. good Hey,

Jeff Kauffman

have Thank my been at you. A of questions point. lot answered this

Just a couple of nits.

you seeing the this trucking the point orders XXXX? pain change XXXX that for not so do particularly the markets the on seen there XXXX that asking are your some pricing we for specs mentioned are know side You on seeing versus aspects of are volumes. you to yet much at customers any point, Have

Preston Feight

It's a question. No. nice

really fuel most costs our that provide think can for the of efficient, are operating looking customers the PACCAR trucks always as I And to being lowest we they beauty the customers. find. that’s that

our the customers. a the have most vehicles who best team do efficient great making at passionate job people develop this for We of of really sure trucks we and and are sell

so, fundamental at. up sure to the always about shift. make they're always to looking specs any the way, stay customers been We're that's hasn't that but there lined what I think And going and

Jeff Kauffman

noticed sequentially am be for could profitability I quarter. tax have Okay. little bit randomness, being a wondering, out to I maybe America? And then do terms just rate up the That year? rate in I but of nit. just that driven that the one be was full with from thinking of might North more first What last tax should

Preston Feight

Yes.

the head income it It's on tax mix I rates. North think there. America hit an you of

states, in So, little than quarter. so and including that affected the Europe, bit a higher

Jeff Kauffman

and All you. already. the been Congratulations have asked I Okay. have. All all That’s questions thank right.

Preston Feight

lot. a Thanks Great.

Operator

Our O'Dea comes Research. from Joe next with question Vertical

is line open. now Your

Joe O'Dea

Hi.

up. it to down With rate the that's America going then not build see going North with usually it's Europe come up in think in XQ, I historically uncommon XQ, but

going this in Should your And we America so that expect in that I'm current just maintain North in XQ in you build Europe is at something rate curious with that some point you plans XQ? now? what's on right that would of got the for increase

Preston Feight

Yes.

for We the roughly rates we to not and the don't fourth US reason have as the see in and half quarter for a strong we the backlog substantially so Canada. stays is where think said. any build it full It's second

Harrie Schippers

that Canada will build third overall. right quarter is the fourth you're opposite, than just doesn't But holidays change and more rates US quarter have and so daily Europe in the the

Joe O'Dea

Yes.

build question X.X. And you're yes. rates, then, a around at daily months the Just on industry so of X.X, your inventory, comments at

is historically, the the low in average think two. I industry

curious as So we cycle you think through where about targets? I'm historically, sort average just of

Preston Feight

within of This and our normal to space kind's is healthy is be. band it a

Joe O'Dea

Perfect. XXXX orders compared just is the XXXX? pricing taking, of And then that how you're to one

Preston Feight

fairly the consistent on customer, is right the pricing but depends just It now.

Joe O'Dea

it. Got Thanks very much.

Preston Feight

You bet.

Operator

Frohnapple Research. with next from Buckingham Our comes Neil question

open. now is line Your

Neil Frohnapple

Is centers Hi, at America and used in trucks the starting at demand And used a from North to your pricing and any market Europe standpoint? both inventory rise good on morning. truck thoughts all?

Preston Feight

Yes.

trucks have we've commanded a XX% share years think in our a maybe invested watched the our moderated market. PACCAR in capability. from past the of we've is at things you one And selling the the the about has capability, of trucks look market where grow QX, part but being to several it I as over XX% premium nice bit was if used creating in truck great pricing used

a And adding on and in distributing in Los facility, So that's good well. customers. have ago A few managing years one we're trucks truck the this then we did Czech fantastic Prague, in why we're new capacity, Texas. does used that building facility Europe In we creating to of trucks dealer Angeles. a network one Republic got job a as we used used Denton,

capability feel our in we good like we’re space. premium So between position a our and

Neil Frohnapple

quarter's interest or as Is Okay. runs moderate, if any truck couple that prices used time lag FinCo And when think to continue other through profitability? the starts of what's were a usually that follow-up I it that the to thoughts and lag there? lines? impacting there as as far a

Preston Feight

think of quarter it obviously would really and of that's calibrated of I an used it a wholesale. And percent depend have kind our retail the the in depends good on fact selling Yes. impact matter into and don't the position. job of trucks lot we lot which of would on on team versus a a retail

effect many there characterize too is really there So it. in mix that

Neil Frohnapple

share market outlook? duty et Okay. just America, you. What medium cetera? one market to the here from you're seeing any in one then And customer’s Thank changes on final notable the North

Preston Feight

for previously or the we The consistent plus and Thanks XXX,XXX is and sure. to size well. the what said really minus business Yes, questions. doing units then seems market

share well I performing think range. be are market will the and in that space our roughly our in same the trucks

Neil Frohnapple

Thanks much. so Great.

Preston Feight

bet. You

Operator

from with question comes Melius. Robert Our Instructions] Wertheimer [Operator next

open. now Your line is

Robert Wertheimer

Thank everybody. you morning and good

Preston Feight

Good morning.

Robert Wertheimer

every the pretty established this and all question orders and if same could I just - My models goes of is it open next year? pricing year taking us simple. the book wonder bet for remind And or then for if as a for just on you is year. Is order that mechanics the is configurations? on

Preston Feight

it I models. for being I order established, terms those So what think open all discussing now previously right they what in and the customers doing. ended and about have a we're We trucks the their being up is with focused around and deals that spec what the say we would is up all of end for being love it done we book we're When the in lot. that and enjoy trucks, taking orders pricing

up end worked So being individually. through almost those

Robert Wertheimer

it. Okay, Thanks. perfect. That’s

Preston Feight

You bet.

Operator

Our Scott with comes Group question next Wolfe from Research.

is line open. Your now

Rob Salmon

for morning, Rob Hey. guys. Good It's Scott. on

Preston Feight

Rob. morning, Good

Rob Salmon

the am increase to rate, with level in implying the in question quarter production basically guys of quick clarification you're regard build hearing the it right maintaining you is that Or I some half third on the back that fourth are guidance? quarter? A there planning

Preston Feight

expect watch piece watch substantially but does, is any the that significant to going and up is we think quarter quarter the third don't we the where the as shifts. firm’s what quarter are full, - fourth fourth see I I we'll

Rob Salmon

That's out year, we see helpful. the and revenue next intimating about to guys order looking that up book the actually be were could And next year? your preliminary comments you strength

Preston Feight

next we I think year. intimated don't

Rob Salmon

regard couple used the with quick questions then market. just a to And Okay. truck of

would Could said year-over-year or a And a be it saw of owner the you kind as if from what that the in little soften you increase describe channel, bit. helpful specific seeing You up price end well? small fleets seeing on operator you i.e., of base realization currently sort kind of marketplace? one you’re of are

Preston Feight

Yes.

retail to you are of I think As so with just Kenworth, many percent America, to PACCAR results. of been I and And how competition and retail a think coming said has real America, has what brought we then Europe well. products it the DAF, premium, a command about - - us Peterbilt, earlier, it's relative which as especially I effect they trucks terms good doing think in the North I back percentage, our lot in grow out able are think trucks North do those and we've position

As them. those to think far are as difficult the plan overall forward to. market, watch trends we'll I the of But majorities

that a team really great managing business that's well. We have

Rob Salmon

kind FinCo. which to one Final the guess That's helpful. of relates I

was the sequential on that bit still As we receivables level Is a their of slight for uptick the seeing provision or saw obviously, in terms a at some What's you're basis. improved little a of driving nicely carriers small low that and of that this… losses so softening a is year-over-year uptick, a in on that? just receivables,

Harrie Schippers

low, Most has low, well. really But is the losses past managed of that the due dues really larger portfolio. credit to portfolio remain remained

that their bills So, we've trucks with make time. got a lot customers of on their good money and pay

Rob Salmon

Appreciate guys. Really helpful. the time

Preston Feight

a Have good day. bet. you Yes,

Operator

from Evercore. question David next comes Raso Our with

Your line open. is now

David Raso

Thank you. at the define bit in US, us or we I how as of America, just you want commentary today, help backlog, get year-over-year just Canada sense position? you sit U.S., that backlog know but North a about deliveries, you’ve you can America, Quick to your with question. in Canada, it some North sliced as your your year-over-year your

Preston Feight

had order cycle. happened from truck XXXX's what year-over-year or up normal that's XXX,XXX in truck Obviously, substantially it’s intake intake. moderated Well, order XXX,XXX from a

that on so at its probably sequential a year-over-year, down, it's high. it if - sustainable was down not a from So, pure you but level look it's

very high to it's and very so XX,XXX still normal the well. levels, And doing and trucks strong, in backlog really compared

David Raso

the industry the the clearly to I down trying all we it's I is most mean down XX% just I than industry? backlog less am feel mean, year-over-year. use, data your about down. get is a

Preston Feight

I backlog industry to Harrie is XX% of about if which relative a the in industry share percentage XX% way healthy market we think of that talked about means David backlog, a a that think very and the backlog XX% to think share. backlog earlier, to that is the best market our have Well, about us you call

David Raso

figure build to were just of If much days, just the fourth daily is I helping into quarter fourth better out a people I rate thinking. XXXX, probably quarter? that trying the stays that's much but same, have argue the would how how builds goes than Yes. less normal seasonal the was little a

just constructively quarter, XXXX? about you're feel into XXXX. your still it am speaking get I while about a to that helps mean does what pretty orders But the trying fourth

here to implied again, doing a mosaic trying just together. But the industry than your share the backlog backlog So, is put industry in obviously that given better gain versus totals? the

Preston Feight

Yes.

really well characterizing it you're David. think I

David Raso

Okay.

Preston Feight

us. right get this think XXXX to that what to that exactly I pretty we'll and it does well improve closer watch as that's

David Raso

Very helpful. Thank you, guys.

Preston Feight

You bet.

Operator

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

Ken Hastings

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

Preston Feight

everyone. Thanks great Have a day.

Operator

gentlemen and call. earnings you Thank that Ladies for participating. concludes PACCAR's

may disconnect. now You

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