PACCAR (PCAR) 22 Oct 192019 Q3 Earnings call transcript

Company Profile

Participants

Ken Hastings	Director of IR
Preston Feight	CEO
Harrie Schippers	President & CFO
Michael Barkley	SVP & Controller
Joel Tiss	BMO
Stephen Volkmann	Jefferies
Andrew Casey	Wells Fargo Securities
Ann Duignan	JPMorgan
Erin Welcenbach	Baird
Benjamin Burud	Goldman Sachs
Timothy Thein	Citigroup
Ross Gilardi	Bank of America
Jamie Cook	Credit Suisse
Courtney Yakavonis	Morgan Stanley
Adam Uhlman	Cleveland Research
David Raso	Evercore ISI
Jeff Kauffman	Loop Capital Markets
Joe O'Dea	Vertical Research
Neil Frohnapple	Buckingham Research
Robert Salmon	Wolfe Research
Shawn Kim	Gabelli Funds

Call transcript

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Operator

Good morning and welcome to PACCAR's Third Quarter 2019 Earnings Conference Call. [Operator Instructions]

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 including mode. risks any prior information members ask of participate conference in that on media and and with will a As today results. conditions that the Certain involve presented affect be general calls, the and expected may competitive we forward-looking economic uncertainties,

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

would to now I like introduce Preston Feight.

Preston Feight

morning. Good

provide third PACCAR's will highest customers To update Harrie quality around our highlights. business our powertrains, Schippers quarter solutions. and I'm world and you excellent proud begin, of the trucks, the employees I on an provide results who and transportation

and of gross XX% third on revenues. of PACCAR income increased million, the strong return of other quarter quarter year. after-tax XX.X% achieved third to income and X.X% resulting in services $XXX $X.X financial achieved PACCAR the of net billion a In to robust for and sales parts, revenues in third PACCAR the the also quarter, truck, and last year compared margins net date.

North which our offset the This record revenue regular days higher achieved quarter. shutdown, was delivered during billing Europe, the and team the trucks compared in third by quarter, to Through in year, the to of partially DAF's fewer deliveries nine first PACCAR XX,XXX XX,XXX summer America. reflects months due second earnings. in

in to quarter, gross to in lower deliveries will by of daily quarter XX% other the the compared to be build North and lower production North margins XX.X%. days America the and rates are Fourth fewer and in truck, to to Europe. range X% In parts quarter, due X% America be fourth third estimated

dividends dividends the of share. repurchased quarter year-to-date there authorization. in Board third third million $XXX than of period declared $X.XX share dividends current stock shares in XXX,XXX and the of last We declared during dividends same $X.XX remaining $XXX PACCAR higher is per quarter, and Year-to-date million the XX% Directors' of per were year.

PACCAR lineup continues to create the set complete well variety and of of innovative powertrain is supply customers diesel technologies, a electric electric, Peterbilt vehicles a positioned models in to cell technologies. in have testing battery Kenworth, years, are the range a two of truck PACCAR introduced fuel last full powertrain and including with DAF engines. field of that applications. industry a and

opened vehicle embedded This and solutions and our software development year, software, accelerating U.S. Europe PACCAR the are customers. centers connected the has that for and in research development PACCAR two global vehicle of

in Show January. complements the Silicon week, development to innovative products you Atlanta Center the XXXX, the in Innovation level The CES Vegas which Show in in extensive PACCAR and we PACCAR at autonomous of X and R&D North Technology is PACCAR Valley, at many will PACCAR's We in efforts, trucks. and Vehicle there. of showcase Commercial American our and next Las the opened on focused technologies hope see X

environment We employers that as to gender at were were recognized supports Kenworth, Conference. that diversity. company Trucking and for PACCAR in each Peterbilt Annual for and share Women honored pleased are parts top the work culture, We women excellent

provide truck next update year. Parts, Harrie on priorities Schippers segment, Services an now PACCAR investment and will Financial for PACCAR's

Harrie Schippers

Preston. Thanks

strong truck greater continued Europe's for market, truck economic to range XXX,XXX be Our than in of XXXX a modest reflecting to and XXX,XXX XX-tonne forecast, units, growth demand.

to grow economies and Eurozone the are year, U.K. expected X%. about Next

to XXX,XXX to above truck range XX-tonne European XXXX market of the in with a be another expect XXX,XXX We good year, vehicles.

XX-year with industry low grow U.S. tonnage The year, sales and XXXX, retail economy Class grown strong in U.S. year-to-date. continue unemployment, X.X% consumer two last years. over the the Canada spending. has following X In Freight and orders production growing and the to X.X% is this strong

U.S. trucks. estimate retail sales range of XXXX, industry in and Class be Canadian XXX,XXX to to the X We XXX,XXX

We be demand. to normal line another and in XXX,XXX U.S. estimate of expect XXXX range the to X and Class trucks, truck good in Canadian the to markets economy, with be XXX,XXX replacement

truck XX,XXX XXXX. year. to above business of year, XXX,XXX vehicles South Parts in in quarterly XX-tonne The should be range in the XX,XXX slightly PACCAR and XX-tonne projected and year slightly to truck above this $X strong a revenues of trucks next higher billion. of XX,XXX segment In be American to this the Brazil, market is higher range generated

quarter Quarterly trucks and engines XX% in third last distribution Consistent higher of as customer year. fleet million, and pre-tax and number $XXX TRP focus parts in income a drove Stores, PACCAR programs the investments results. services such growing than these capacity, was operations,

high TRP provide and Since stores TRP open aftermarket year. have all dealers on will and constructing continents. PACCAR retail of XXXX, The buses stores DAF, owners is six Parts trailers, new next products services two that and trucks, to XXX centers, engines. Kenworth opened branded, quality nearly of Peterbilt makes distribution

in square facility efficient power Ponta Grossa, square and foot will Vegas, XXX,XXX XXX,XXX of foot in A make Las Brasil. use which solar facility

X% by year. We X% expect grow next part sales to to

well, Peterbilt inventory the income $XX.X of and truck this PACCAR declined. portfolio a was pricing $XX premium used past and Kenworth to billion quarter, low million. resale increased, commanded third values record earned and used third pre-tax Services industry truck dues. Financial with truck the XX% performed quarter, XX% quarter The market. In in

to million of expenses the be million. In to range capital truck, million continue powertrains enhance $XXX transportation to spending million capital PACCAR's $XXX to expenses XXXX, for solutions. million, to million These planning investments and $XXX investments to of we're $XXX $XXX million. XXXX R&D and estimate to in and R&D $XXX will $XXX of We million, be $XXX

you. your to answer Thank We'd pleased be questions.

Operator

BMO. [Operator with Instructions] first comes question Tiss from Our Joel

open. now is line Your

Joel Tiss

used be I it guys? for not in is going everything, How first first. guess. I'm time to Wow, Wow,

inventories give little the bit? that give to your going if could are where if of sense then mentioning, a be, you wondered I of And just for for and mentioning you -- after production is of sense got production kind sense industry us we XXXX, any I thinking So levels just wondered where -- us for the up XXXX? any could industry you're a where

Preston Feight

industry. retail nice sales backlog the In inventory X.X at that's that as if we the have just so sitting we look already think you to Sure, watched industry -- for We we've not the shape. really in be now, normalize, us. of that We've all at have there, it's inventory, months right shape level. of backlog good adjusted XX% our out a in

that's shape. So in good

quarter going And both like build get forward end build North to took adjustments we a right and Europe got rates, as the into America and look then feel we've we reasonable -- the for markets, that think third the into of them about so XXXX. there, we

Joel Tiss

any can And give in bit, all about can up a are profits margins, the see you parts, growing the see XXXX, us little and faster revenues. margins sense we I could than

a us again new and is number the gave business in able centers enough do in be distribution momentum think? XXXX, the that there You year, parts you next to to revenue for

Preston Feight

we margins we likely and gave year. guidance I the to what comparable would X% be on think this I think X% saw the to growth,

Harrie Schippers

typically parts. that's In see for the we XX% to XX% range, what

Operator

Stephen next from question Volkmann Jefferies. with Our comes

open. now is line Your

Stephen Volkmann

used to Joel either. not being I'm first

Preston Feight

morning. Good

Stephen Volkmann

little question on to I'll maybe his But pile a bit.

be in thank laid in point, second around your production able enough, for you'll half is So the for to the of of this that stable sort here that Preston, just it you of expectations. the production -- expectation the XXXX, baked declines comments Is sort XXXX, is out? at way, be keep that kind plan the through of will that you've and

Preston Feight

what be think to it's I year, even month every don't I XXXX. quarter think mean happens going be be different. will will we'll in an different. I every watch

we adjust build we make Right quarter, appropriate now So in rate backlog have. America. orders we'll North we sure especially first to reasonable the in have the that

about build comes to rate. we like watch go year we'll along, it's up the whether we or right as So got feel ourselves in down what and need do, we've

Stephen Volkmann

we decremental can year. just little I this understood. -- Okay, Harrie maybe a about bit is margins next And since guess talk, be will the decremental a question, it

holding to as with your bit the distribution in mid-teens think will an higher, U.S. kind number. reason kind parts mid-teens, You've margin of just in the occasional could teens it centers, is a with job investment? growth the you your and your all of these etcetera. have you curious sort additional decremental done be that little of Do incrementals integrated kind because also a level, good engine of there I'm high a or vertically more in think of be

Harrie Schippers

that expect margins decremental to -- next I seen XX% historically would for to and we've and I XX% think be we've in year. range the similar incremental

Operator

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

open. now is line Your

Andrew Casey

of questions. couple A

SG&A on for provision this receivables what sequentially region? Financial of is and losses change, and bit year-over-year, but to kind that and a on was the was and were little First Services driving due it any up specific at picking it,

Preston Feight

Services, perform low continues in saw to The we losses. we've a really past Financial dues. had What credit had low We've really portfolio well.

in with In was we've used headwind Financial fact, portfolio. pleased Services The pretty we're trucks. had only that

Andrew Casey

And want beneficial to and the QX volume the buyback the stuff related compare occurred and something contracts in revenue difference QX just segment that driven increase, like in growth growth right, comps that. else gross to by you pretty truck between make and or have year the really I recall had spread I and some last then, timing X% to had volume I I a the if was the there sure issues And Was growth. performance that 'XX, quarter? revenue XX% this the pricing,

Preston Feight

just costs. pricing quarter think influence, reasonable this more about, was that have than we Yes, you offset if what did about

So revenue for a there. I I helped of the gone to and of going on lease kind margin quarter. stronger the that and QX was terms what the performance know XQ therefore, did numbers that back operating 'XX fewer have think back things in QX a I've if of that are We bit. drove don't in bridge XXXX, in those of of our our versus deferrals 'XX

Andrew Casey

mentioned the to to in digit? you we used the decline? North America, see kind you on gradually of Are think, double more are starting inventories growing see then price started have truck And I market trends

Preston Feight

of over one grow in nice new used we've the a created open We fourth you a the investments will of trucks, So the the premium used PACCAR, the Angeles. things used Los for past trucks been in in years if it Texas, in is made PACCAR's in capability. few our quarter. Obviously truck about center marketplace. creating truck value that to We're used think has Denton, middle provide one

used that we in our actually compared over into our the than that's of declines to premium for this kind XX% XX% XX% on thing market nice And seen to general, and a decline, But that's that truck digit have that with the customers, been of some go competitors. of to dealt more have a So XX% quarter. competitors. really level and double already through sometimes,

Operator

Our next question with JPMorgan. Ann from comes Duignan

now Your open. is line

Ann Duignan

you the used our in just shows else's. Yes, we garner market, and down everybody prices you're data publish premium are like that do year-over-year that analyze these a while seeing

So been, thank has a it for X.X sales, around you inventory that's peak. My dealer, but the is question at month trailing that. on are XX month months, confirming you a of -- trailing know based at which your

that of and you're those are to have as to going year, to months at inevitable, expand, into production. the we going cut it isn't next go dealers So supply

to that, and the under-produce year, about So you you backlog? why talk have got retail sales higher that could next despite going wouldn't just fact into you

Preston Feight

it, the think like Well, acknowledge it. than less is look you we bit the we I We trailing products, our while the inventory, our there about dealers the forward. think rate. all time, demand think do maybe and feel little talk -- still to be while that's customers see we And will I admit all you good a that I time run for would and as

people that, So we're about get the expect year's to customers, continue meeting very to the been I next and I indeed into quarter's throughout market be pattern talking order as but I with buying would seems last quarter think lower, what trucks, is and the Canada. occasional going we throughout the be, buying fourth will to say intake that country, solid has be

that is I would So okay. expect our inventory

market As those the we to we production, up I down, far adjustments like think as earlier, as adjustments said and it. make demands go

Ann Duignan

cycles a decline, cycle decline in normal reason, sure. bracing I for going over one XXXX, ever them couple back that's on your we to based again. we long and been of guide's a for year into on then be history. a term for a the seen And have truck years of Yes, But just lot whatever know if or manmade. then have a should we're the that's and

years perspective of Just from your will be on beneficial. that your experience Thanks.

Preston Feight

decline it forecast that's a tough longer there what to rate Yes, might be. thing a a than last would of out kind year. And if

and we are Canada and think look positive, U.S. still the there high. GDP I probably strong is in say, tonne miles at are this right fundamentals economic now.

is I where are think, market things we the feels of XXX,XXX normalizing XXX,XXX kind to just there is like think happening estimate of of too. --

as As it being No it's pause it will for a it more in a if far next economy, will down and idea slow just year. beyond the than year. if reaccelerate, that or

Operator

Baird. David with Our next from question comes Leiker

Your is now open. line

Erin Welcenbach

on Welcenbach Erin is This for David.

all? order at activity the an for backlog pickup question look perspective, from when year, expect would and this firm my how just if you to industry So you does is,

Preston Feight

in them. different reasonable them. already job make just we I we needs, sure looking backlog we like like we've cancellations, and now. were into think -- there backlog addressed is and right we've our backlog, shape with a were feel good of a I to had our that took that scheduling feel Well, speak if our but the industry, there If working that customers, Sure. total I for real done can't

Erin Welcenbach

any your And then expect can digit in my outlook on Europe, color your if for second provide question for regional additional next is and declines maybe just, given thoughts year, would sales. you variances you double some

Preston Feight

for U.K. the things this -- year. seen the nicely of quite in been done One us Europe we've has that has

around the that all and will of maybe news it, spite in continue. So

kinds strong We Romania great countries all and and to of also tractors a -- have in watch as Europe continue of Hungary Poland and really leading development, And market expand job like in we Europe, the are brand Europe. countries. our DAF and are of east East leadership products throughout we we those expand throughout do in premium

market grow to share as of there. So does very DAF the matures, total Europe us enables well,

Operator

from Jerry Our next comes Goldman question Sachs. Revich with

now is line open. Your

Benjamin Burud

This Jerry. is Burud on Ben for

spend Just to wanted a more Europe. on minutes few

row it in second quarter main I guide in a the believe seems it deliveries, So seems, increasing ago X% three of of was only driver year-over-year the the months your adjustments X% X%. production to quarter. be and to

production quarterly production second a was spend color there there, drove there, over if just to a or time on there more helpful. if would Thank softness you on can of So little be you any And that's if a what continuing? the more basis guys what you. like is surprise, flex adjustment,

Preston Feight

Sure.

I comments did demand. matched onto think -- the with where rates. Europe, share held our build we've I where think it market market point your we've we that are take adjustments gains the a reasonably our seen accurate, as to to And

like we're at for So setting historic market highs is share. XX.X%, near us, in which

setting that's maybe it right about the was balanced we sooner Europe be, So we're now. might made we think it little And like it have adjustments, and down probably coming than right a and necessary feels why thought the we we levels.

Benjamin Burud

location Are new give update next you're and TRP in expected year, of an the thinking you and locations in on can dealer Kenworth XXXX? year, you locations? thinking And adding for about per growth how Peterbilt increase XX then, still us dealers any

Preston Feight

Yes.

significant We by investments Europe. We North I industry, in best a just have we mean in have with -- America partners. from start time fantastic I of see dealer They're and I'll business mean them. lot and network saying, in them spent the the

their way constantly customers one facilities, uptime. bays adding it's our capability, is shop that make So this, sure and to service to they're their and renewing about think maximize

great investments year lots And facilities, those that new of continue into adding to around plans next locations. with so they'll we'll watch make

I'd adding more some to development TRP have, as point of, the as -- XXXX capability. be in in well, in your service Stores, much probably TRP expect growth it be is continuing Europe, replacement bay North the will America. more What And this in improved bay along year. Stores we will we'll service of and And lines we locations capability location see or

Operator

next with Our Citigroup. Thein comes Tim from question

is open. Your line now

Timothy Thein

year-over-year on underlying a it or just also mix bigger First that a that almost kind was call standpoint, of there of from North growth, truck XX% part XX% revenue that's growth story or content contribution from America per being -- or the deliveries, a contributing? mix question, just this all -- that is

Preston Feight

you've mostly right. No, from got America. It's about contribution it North

Timothy Thein

Okay.

Harrie Schippers

improvement, Pricing right?

Preston Feight

Yes.

Timothy Thein

just that other maybe okay. forward, assume is Financial some disclosure nature? the a the there in back used, the the And of impairments one a that terms depreciation, spirit quarter, potentially increase, just, how one-time are should perspective you. then on change the going we versus on I kind and Thank that is release. we will And in of be that increase -- timer's profitability Right, question But or a within pre-tax and Services interest higher rate in know of profits; sustained much terms of in kind in in or the that a line, limited here similar that the the line? from terms of presumably of more losses in run a of we third were have

Preston Feight

So the to one. the to we continuing address question, in want forward the as of Michael as I will profitability, the that will your continue let strong far quarter we third think profits for detail and going had

Michael T. Barkley

reflect that we Yes. taken, have also adjusted depreciation impairments. were did some expected impairments to We and future our

reflected And pace Preston as similar going run indicated, in a rate so will coming that be will continue And at forward. quarters.

Operator

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

Your line open. now is

Ross Gilardi

downturn how go garden-variety forecasting back draconian back think of next downturn, next just the with the margins decade, to the mean, margins you've go particularly to ex gross gross trying XX% scenario XX% that you're last more relation Parts do been years company the growth R&D gross more like margins think around year. evolved understand in got XX%. I way seven in have to over in I a see in look whenever But business? XX%, in you a to to I'm or the if just it. you eight it comes, than wondering, given to for I'm the has what in

Preston Feight

think one at but in always I looking of thinking just great one We're course about time. year, operational the is of efficiency the are we not PACCAR, that control. gains, strengths over cost of always

cost like that's and thinking quarter margins solid think quarter, we this had control, predict even into the already been the I us we're margins facing, markets head as quarterly about XX.X%. next to to we and normalized So deliver the we've gross market aggressively for we enabled in XX% gross

I XX% So that our always pretty solid. are we and managing think that for of will to we business deliver customers, the the XX.X% that efficiently quarter think next we be benefit

Ross Gilardi

come, that. Yes, about I I'm to in to next goes with X it when I saying, mean, I would if does your prior has to it do I realize very difficult next to look asking been looked range, just like stay forecast quarter. you eventually mean, XX% Class you the -- comparison downturns is. in for build what imagine when wasn't I'm I sub XX.X% -- margins to gross think trough number. it you're not what the asking -- like? XXX,XXX

Preston Feight

us. Well, kind hypothetical of that's to

and and go profitability through we'll markets long, we and in cost even to we of good those we control, circumstances. return, back think where job to But we continue still Just circumstances to will don't continue XXXX, might recession long to can do which the in that have always of all those, a history it a with down if predict. different focused we on those were be react and imagine, you might how

Ross Gilardi

just will the of reduce be can demand? we about we see so production move in SG&A, to ratio normalizes, I And level X.X% that think How higher? source we revert mean as -- this if it SG&A we should as do it year, as X you normalizes, Class how what replacement savings? production at next model the into of sales XXXX, stay year, back the quickly and for it at or or does ratio

Preston Feight

to in those developing make we're and Yes, future. looking the our sure services we and into looking what for the right in I in always that for SG&A, spending think are customers is products

And on are think of level so to and think for that capital as is come the bit. and I us sure flat, rigorous capital costs we make we controlled. R&D the in our R&D SG&A, down disciplines, will little spending roughly appropriately a shared, apply we

Ross Gilardi

just when what the that is that or are to of the from flexing you workforce, is that And other get source point? main -- the -- if savings,

Preston Feight

contracts think those lot Workforce we agreements, things, looked really in We is of get of terms of a do, all things licensing at. is kinds one, another, don't work fixed pricing. of

Harrie Schippers

based organization possible. through necessary sure year, our go every budgeting as a We our and lean and we keeping review zero process, all in process make as budgeting detail that overhead spending we're as

Ross Gilardi

the And note, could to capacity Netherlands XX%, to you of come on Brexit? around it's the of remember, I market in is us if U.K. us what ballpark? portion did U.K.? deliveries go that serve sold Leyland's you that hard remind the then mean right European remind versus out can European seem of production the your a through the Europe, the just shift U.K. I DAF can percentage from to you And that we in Union? to the

Preston Feight

U.K. the in the us of we is, U.K. have I for one think about we beautiful things the production So capacity as great

trucks continent, able we Eindhoven, in build we we U.K., trucks, might can We as not have might CFXs need the be on continent we we market, what also the in for well. so on to need can appropriately the flex in build build Brexit depending the we the and the it U.K., so can or for were and the all

looking at number... were good I Harrie, So that the gives us think and flexibility, you

Harrie Schippers

The between production. European of XX% and XX% our U.K. typically is

Ross Gilardi

be out the the of like for this -- of market a for year, U.K. U.K. at would just the be year existing production, least most So would factory?

Preston Feight

and both, in Europe. we it for enough the U.K. we Europe and have -- support support enough use that's Yes, we can have to capacity to there

Harrie Schippers

a very factory in us the that manufacturer give has that advantage. could being nice only a And the truck U.K.,

Operator

question from Cook Suisse. Jamie next from Our Credit comes

Your now is open. line

Jamie Cook

then differences thinking about the XX% the we dissimilar with question, so, variances vertically as and one And commentary my is regards being you are second more cost been integrated think relates you the where or costs. sort I now. U.S. of that the not this decrementals guess be you. much could guess year, to the price forecasting, and that the or you you are the I to are question U.S. you're Thank coming in weakness as has Europe about -- strong and sort any pretty there about do pricing XX% of a material Obviously for anymore decrementals for downturn potentially guys think guys so price made to of you can tailwind you? from, are hold that

Preston Feight

Yes, I as possibly of XXXX, to bit it in tailwind in looking us, will what of continue the could -- capacity, are as at price that question And, we'll for in in market, aggressively to true, a of mentioned, a best be next structure. inefficiencies is be of and their second some full our terms your we suppliers our quite year, ships. ability are think cost happens you manage part always and at running

So that. in upside maybe some there's

Jamie Cook

U.S. the first on impact in of Europe just versus difference And margins? part, terms

Preston Feight

similar, similar. very they're Yes, very

Operator

Stanley. next Courtney Our Yakavonis question from Morgan with comes

open. Your line now is

Courtney Yakavonis

the for backlog the your to first wanted the quarter. go clarification the for now comments in on orders the being build appropriate just rate back you have on to right I

the that that month? September beginning to rate the at of assumption right the is XXXX, should your sure rate at then is make -- just XX,XXX we this of also the Or to that was, kind orders, build replacement sub-XX,XXX And your remain current that rate orders comment of then assuming, the forward? we going assumption kind have, return and is wanted So we can that in rest. backlog should build that a of fill the

Preston Feight

Well, build so in the is adjustments we've for rates, this of parts first October that. coming at made our

for So we backlog that have number be quite rates still more set time that put the of we healthy think backlog, there could When our per of and intake you so we've think little build up as a normalization a the got XX,XXX year, and about there. I month, bit quarter next to out for right. a

are orders fourth as ordering, pick to budgets quarter into of up. have late starting summer now. right be cycle putting a we're definitely the quiet, very a the people and It's their part normal time place, are then seeing But of be and to that see to then capital

So whether it's or exactly normalize going a to it be level out. at to month or take it this normalize month should two will out,

Courtney Yakavonis

elevated it like CapEx do on just R&D, guidance an 'XX But before then return. but bit year, guys. gave you of there's that of And what's beginning XXXX a expect seen the and think you you sounds a I the us in still relative CapEx for level, and to versus step-down historically out of

that the at the this about, the of you're up, of that to potentially in then should which thinking well. is pick that could R&D, business investments kind needs nature? And that R&D or lot a we concerns on light of rate of there of point, buckets in and Are next about factored expecting -- be kind decrementals same one-time right as year. that is run So those be kind in in question any especially

Preston Feight

Sure.

opportunities as at much as we right guidance $XXX invest arrived that's projects of and build how making investments, to do, million cycle and For of are business in at Don't both for that always whether quarterly number, at the million or the we $XXX of them long what bring far portfolio in to rates, the continuous is as we've the we the think going level haul. is, -- about and we one-time have We CapEx. and as value, the -- those. the number, do we they're look run

the that approach is now, lot same customers. R&D, which of good have not our right is projects on great out a for there ROIs And really

the we're paint portfolio, improve should at improvements, so a we and ones quality, just evaluating always be and example. the right it's new have of which will the both fantastic and they for And whether those an is, we whether as factory looking and Chillicothe and one is the facility, portfolio efficiencies done can value mentioned, bring you

we mentioned vehicles more and on electric going spending to we projects that as better, look if do we're make then say, do things can those And and and R&D in best kinds look to at we class autonomous going even aerodynamic vehicles powertrains, our the are trucks and them. models, of and at improvements, hey, it's we this, already all of truck

Courtney Yakavonis

margins part mix quarter, headwinds. you mix should any And were about, of quarter there last kind year? then think stockings quarter thinking for this changes Obviously, the just last from of called headwinds some customer out the we we But remainder that quarter. the customer was improvement be this from lastly, that an in just I saw of

Preston Feight

So we But already -- was American think thing being that's cost kind I America for good in And quarter. mix. only I North and really that about overall, us positive would talked think North contributor. say the a was stronger good a it of I a the minor control pricing,

Operator

next Uhlman Research. Cleveland with from Our Adam question comes

open. is line now Your

Adam Uhlman

North America out clarification wanted down to fourth for a break the start sequentially. Europe? being you I X% and your to X% between of with production plans that quarter Could

Preston Feight

steps Europe, they the numbers. in roughly North a how thing. fairly America, same without was the of high-single look they it So smaller I are They the think at in did exact in through that series about how they're running quarterly, ranges same and comparable both moved digits

Adam Uhlman

your well? and in your then Europe as next is what also on view year then, I'm truck medium-duty America thoughts on North wondering And markets

Preston Feight

I in America, year. for around medium-duty the next America XXX,XXX So in Europe around North we're and XX,XXX market right in seeing, for think North it's

numbers comparable So, this for year.

Adam Uhlman

with is willing the back be and magnitude that that leveling order to still declines share to see that out wondering that you do the to you did early? pace start if of bottoming order rates then now, that maybe in us, of region, would the of or are decline, And we too a you if see I'm just Europe. sense get out

Preston Feight

And Europe, seen order going so improving been cycle trying matching of going on a and actually that an calendar the balancing it's really we're what the be recent, build, our what's in we've look year, to It with point. nice with what to at, will timing fact that's up continues. in on hopefully what's and the intake of is

Adam Uhlman

any continent a that of improvement? the region there particular saw Is or part nice

Preston Feight

think it that I part is that market people we've the and think believe our been hold with it want able of to the to record a to customers, those. some of share do in great has to get because our big providing of to on are trucks at and Got to that fantastic I day, end because something experiencing really Europe shares more our trucks and

Operator

with Evercore Raso question comes next from ISI. Our David

is open. Your now line

David Raso

hitting I little with for for engines, the I more you on next was get Can more you of stronger year? of give us you us impressed with parts outlook comfort have year. from visibility kind aging project comfort growth some know But parts that growth? help spot. a next a the sweet a to that the your help little can

Preston Feight

Yes, sure.

in engines. TRP also I It's as strong this a said doing. investment think that result that we're growth you the of, is

a job needs. are fantastic Our does reaching ways customers meeting to their new in in our out that through and there e-commerce team

kind of the taking of more and keep able to just more So market. we're

our it's win-win-win. parts These Ponta for one parts for investments us our their mentioned, growing dealerships, of fully in frankly both who in we get us in for our to opportunities and good because more those partnership makes committed with allow in in to that business, customers desirable which more quickly and customers regions, And it's those in for a Las are good Vegas, good us, them, really real Brazil to PDCs the Grossa provider.

David Raso

Are annual though kind some sort parts some backlog contract? that parts or the percent there business that of of metrics of you has -- any some for any of kind

Preston Feight

more really kind don't of work Parts it's a backlog, much long a... that out of Yes.

David Raso

I appreciate looking that. you're But number? just comfort more some any might anything give that the at, on us

Preston Feight

growth, the several that we years over large to there. from markets to Europe to and the that and trucks think has I performance and products talked out and lot should strong which have will some Well, a a then that comfort part we in relation the strong and past contribute just growing growth America about, great just products, of that reasons also historically North of are come contributed PACCAR that the of continue

David Raso

there leasing front can on this business, are you of in less European that year? you help of little the was trucks, going bit, us you well of, for a said seeing the what into sort last, And it mix the next quarter,

Preston Feight

again can say part of Missed it first the this on side, your you question David?

David Raso

For per you the European price next year? this there help through unit 'XX, delivery some thoughts the on to quarter. business, take for the the where your the the mix business, impacted you on represent the revenues, are into just of Can us of businesses mix buyback guarantees that it leasing us how and

Preston Feight

think I a forward. adjustments to run probably more 'XX lot to like Those gone. it's were has than 'XX looking this they were 'XX going

rate rate at pretty stable optional we're of So fixed and GRVs. a

Operator

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

line is open. now Your

Jeff Kauffman

A Am rate more would maybe a have been looks drive right, if driven North answered. outlook of should bit this is level little I tax rest about a I that's taxes of we wrong, kind does have the would come I down of the higher? I'm questions not lower, rate, okay. be year? and focus It for little lot exposure thinking had a thinking bit, lower of have to and thought like it it that that it American my tax wanted it on about

Harrie Schippers

benefited tax R&D about think normally originally level. than should rate The credits you is a -- XX% from QX We higher in anticipated.

our final are those returns. So

Jeff Kauffman

thing? the the that more end a of of should carry is through quarter to or third So I year, it

Harrie Schippers

of for I you and for QX Well, in XX% should think think terms XXXX.

David Raso

I as look And to okay. --

Thank you. others said That's answered. have question, been all You for my my XXXX.

Operator

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

now is line Your open.

Joe O'Dea

better time... curious, looks that's was it Canada, of Class and X healthy and U.S. whether so market, quarter, like just in growth the pretty than X, the and sort In

Preston Feight

Joe, still there? are you

Ken Hastings

Lindsay, there? you are

Operator

Joe is that showing am I Yes, still connected.

Preston Feight

Well, I we'll will from a extrapolate try little question we you, just kind aren't bit. of guess, your to just hearing -- we

Ken Hastings

Joe we move can maybe on Or could and rejoin.

Operator

comes Buckingham from question Research. with next Neil Our Frohnapple

open. now is line Your

Neil Frohnapple

mean to I tends to wouldn't be I the reason production there in be historically counter-cyclical. production is share market a PACCAR's the question wouldn't differently. XXXX, and your asking I I'm any higher industry? believe guess share little just think market outperform that your

Preston Feight

Sure.

exceptionally well field. the performing are in trucks the think, I

are our the and lowest I best cost economy, fuel the operating that think brand. experiencing we're delivering of customers any

every looking drive do and happen. working should forward sure think does to that that we that market So day up, and our to share happening, make

Neil Frohnapple

going more And lower at Investor to you then X% back year. X%. on to to less Day, presuming the part year, for talked trucks the guess to I'm segment X% just about fleets pulling that outlook, back the just I parts outlook and sales due is a obviously growth the next CAGR relative purchasing spending that next lot

can in So growth rate I to long-term guess, targets? guys order those hit to start at think reaccelerate, for what point you you that do

Preston Feight

nice And to grow that X% declining, I it. rate to right things is Yes, think market back steady again, and watching come when that, eyes a as opportunity a think in as We'll that's as the for it, keep lot X% what depending working there's number a I that far it on of growth on to our happens. up. every

Operator

Research. with from comes next question Wolfe Robert Our Salmon

line now is Your open.

Robert Salmon

are the similar sales, a is level a used the quarter, out, what Could you truck XX%, it absolute of are you you used contemplating outlook, a little contemplating in to was perspective? sounded give looking that down or clarification from truck it XX% kind guys like price third of on

Preston Feight

think that that entirely forecast out to. obviously we've will to where down difficult settled it that seen, It's Yes, amount maybe I But... will stay continue.

Harrie Schippers

couple for It the could stay quarters. next of around

Preston Feight

is think you of healthy out the cabs advantage having we're I the -- a there know demand day PACCAR really there of are of is although a at there just mix values specifically, still trucks. is have that for thing and looking we down, And

of We and our as well. vocational of day are a distribution. of pickup lot trucks, some not A and trucks lot truck delivery, very sleeper uniform lot in cabs, a

I market those perform move and to our So ability trucks. trucks keep should premium probably at getting least outperform, we'll and the again, think the those to for

Robert Salmon

I the gross And was fourth then, guys there, quarter, can decrementals different on get look spread the to price you what out any are the fourth in of you the the of third thinking mix? you give quarter, cost looking as sort at have cost if just quarter? update sort an assumptions margin of a And outlook in for there kind sense production, what about different are of a versus built in to price

Preston Feight

we quarter, on now. be X.X%. think fourth the And cost we're more roughly there right opportunity saw so, think of And pressure, I could some in X% and third a quarter, I costs, will of price in evaluating there the be pricing that but

Robert Salmon

Or to of similar? cost the you opportunity the would are relative quarter? experience should something in in step it kind thinking kind of expect And up continue, XXXX, to fourth you your about

Preston Feight

to guess XXXX it is what hard out in be think I going might be to right now. to

Operator

next Our Funds. comes Instructions] Kim question from [Operator Gabelli Shawn with

open. Your line is now

Shawn Kim

to wanted the business. parts on Just up follow

-- what's long-term million you the trucks. road? the million out I that you X.X servicing I is at if the I think figure, think mid I XXXXs? Investor market parts total So that about MX your your in look -- expect another X guys engines addressable X.X XXX,XXX on the the guess, I those in But way guess, the opportunity Day, right mentioned XXXX. regarding business to way, have you active for about for to mean said guys is U.S. population Class by of trucks service

Preston Feight

it growing there, plant, our a think different to rates Columbus couple I that increase you add about out and One park So MX engine did mentioned the of that's MX of ways. we our engines. in build is, is, capacity

of In do realize in and as XX%, to people some there quarter so we engines, the -- get the continued half, engine. see upside second MX MX, fact, in were some think saw growth third first great we the the I that and benefits XX% for in were we

just park for of I vehicles then the engine. it's think DAF not for Peterbilt Kenworth our And about and and

the of growth team capturing job also XX% our a creates brands, which does a to TRP great the where those business PACCAR, customers us new of for all-mix with for opportunity as I great think well. into are

what's that going higher to better think we're trucks, the for the grow, but just looking itself, always on. of opportunities I And increased understand at where we through service our of comes parts degrees connectivity of provide not levels customers, business and

all growing business to over of point parts those opportunities the So keep to time.

Operator

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

Ken Hastings

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

Operator

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

disconnect. now You may

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