The operator introduces the PACCAR Second Quarter 2024 Earnings Conference Call and Ken Hastings, PACCAR's Director of Investor Relations. Preston Feight, Chief Executive Officer, and other executives will discuss the company's excellent second quarter results. They thank their employees and highlight the strong performance of truck and parts operations, with PACCAR Parts seeing an increase in revenues and pre-tax profits. PACCAR Financial also had a good quarter, and the company's gross margins were strong.

The vocational and less than truckload segments of the U.S. and Canadian truck market are performing well, while the truckload segment is experiencing softer rates. Kenworth and Peterbilt have seen an increase in market share in both the Class 8 and medium-duty truck markets. In Europe, the truck market is softer, but DAF's premium trucks are still in demand. PACCAR is also experiencing growth in South America. The company is also investing in a battery joint venture and expanding its global manufacturing capacity. Harrie Schippers will provide updates on PACCAR's parts and financial services businesses.

In the second quarter, PACCAR delivered 48,400 trucks and achieved strong truck parts and other gross margins of 18%. They estimate third quarter deliveries to be around 43,000 to 44,000 trucks with similar margins. PACCAR Parts also saw growth in sales and opened new distribution centers in Colombia and Germany. PACCAR Financial had a good quarter with pre-tax income of $111 million. The company plans to continue investing in technology and innovation projects, including clean diesel and zero-emission powertrains, driver assistance systems, and connected vehicle services. They also plan to invest in expanding manufacturing capacity in various countries.

PACCAR's investments in its truck lineup, manufacturing capacity, parts, and financial services are supporting the company's growth and its customers' success. These investments, along with the development of advanced technologies, position the company well for the future. During a Q&A session, a question was asked about the potential risk of changes in emission regulations with a changing government. PACCAR's CEO stated that their R&D and CapEx expenses are increasing due to a good set of projects, including technology related to emissions, but they do not have the answer to potential changes in regulations.

PACCAR's CEO, Preston Feight, stated that the company does not expect any significant changes in the total number of trucks delivered over the next few years. They are investing in capacity to support their goal of increasing market share. In regards to the expected 17% truck parts and other margins in Q3, Feight mentioned the typical holiday season in Europe and low customer rates in the truckload sector as potential factors. There are no major one-time costs impacting the margin. Feight did not provide specific details on the negative incremental in the Parts margin in Q2, but stated that there are no major changes expected for Q3 and Q4.

Preston Feight, CEO of a truck and parts company, discusses the surprising decrease in sales in the current market. He attributes this to strong sales from the previous year and increased competition. However, he remains optimistic about the company's performance and expects improvement in the future. He also mentions that the European market typically experiences a seasonal shutdown in the third quarter, but this year is expected to be more normal. The company has adjusted their expectations for the US market.

Preston Feight, CEO of PACCAR, discusses the outlook for the Canadian truck market, which has been reduced by about 10,000 units. He notes that the vocational and LTL markets remain strong, but the truckload sector is still struggling with low spot and contract rates. He also mentions that the Parts segment is facing margin pressure due to a 3% increase in price and a 5% increase in cost. He emphasizes the company's focus on maintaining market share in the Parts business, but acknowledges the need to balance price and cost in order to remain competitive.

The company's performance in the aftermarket parts market was strong, despite the market being smaller in the US and Canada. This was attributed to the high quality products and transportation solutions provided by the team. The order book for the third and fourth quarters is mostly full, with strength in the vocational and LTL markets. However, the truckload carriers are still deciding on their cadence for the rest of the year. In terms of deliveries, the company exceeded their expectation, but the margin was at the lower end of the targeted range due to price costs.

The speaker asks about any unusual factors affecting the company's performance and inquires about the expected trend in price costs for the fourth quarter. They also question why the company's deliveries in Europe are down compared to the industry forecast and ask for clarification on this issue. The response mentions a supplier issue in Mexico that was successfully managed and expects similar trends in the future. They also mention challenges with price and cost due to decisions made by truck load carriers, but offset by strong performance in other areas. The speaker also asks for any insight on the European market from another speaker.

Harrie Schippers and Preston Feight discuss the impact of the softening market in Europe, particularly in Central and Eastern Europe where DAF is strong. They mention that DAF's new fuel-efficient model is helping to offset this decline, but the weaker markets in this region are having a greater impact on DAF than on Europe as a whole. They also mention that the company's pricing discipline is strong. The next question from David Raso is about customer conversations regarding a potential pre-buy and the inventory levels in the industry. Preston Feight responds that there has been no change in customer assumptions and that the EPA rules will likely remain in place. He also mentions that their inventory levels will be carefully managed as they continue to gain market share.

Preston Feight, PACCAR's CEO, believes that trucks are being well-used and there is a lot of freight being moved, so there is no change in assumption for buying plans in 2025 and 2026. The industry's inventory levels are at a healthy 3.9 months of retail sales, with PACCAR's inventory at 3.3 months. This is due to their high vocational share. Feight also mentions that with the infrastructure spending and reshoring happening in the U.S., the vocational market is expected to remain strong for a while. There have been supply constraints in the vocational market, but PACCAR sees steady strength for a long period of time.

The company has seen favorable developments in warranty costs due to the high quality of their trucks. The cost of parts has increased by 5%, but the company expects to see improvement in price versus cost in the future. The inflation in parts is broad-based, and the price versus cost reflects the softer sales market in North America. The company has also seen good performance from their trucks in California that are using the new emissions specifications.

Preston Feight, PACCAR's CEO, believes that the California market has slowed down due to the implementation of new clean fleet and truck rules. However, PACCAR has developed an engine that is fully compliant and is pleased to be leading the way into 2027 technology. When asked about the industry's ability to hold on to price, Feight believes that PACCAR's products provide a lower total cost of ownership, making them more successful and structurally stronger. This allows PACCAR to realize better margins and provide faster delivery of parts to customers.

PACCAR executive Harrie Schippers discusses the company's focus on reducing greenhouse gas emissions and improving fuel economy in their trucks, which has led to a significant increase in market share. CEO Preston Feight credits the success to their investment in new products and a strong dealer network.

The Parts organization and financial services have been helpful in supporting the company. The strong vocational market, where the company is the market leader, has also been beneficial. The company has introduced a new product in the medium duty side and has seen significant growth. The company has been held back by supplier capacity in the past, but with the supply base easing up, they are now able to gain market share with their new products. Regarding the battery JV, the company is still trying to understand the future of the market and plans to develop batteries optimized for commercial vehicles through their joint venture. The primary applications for the batteries will likely be in return to base operations, such as medium duty or pickup and delivery, where the total cost of ownership can be positive with a battery operation.

The speaker discusses the company's outlook for the third quarter, mentioning a production shutdown in Europe and market adjustments in North America. They also mention that pricing may be affected by market conditions, but costs may also have some impact. They will provide more information on the fourth quarter in the next call.

During a conference call, Kyle Menges from Citigroup asked about the Parts growth outlook for the back half of the year. Harrie Schippers and Preston Feight from PACCAR responded that the expected 4% growth in the third and fourth quarter is supported by the opening of new distribution centers. They also mentioned that being 50% sold out for the fourth quarter is normal and that the market is performing well for PACCAR.

Preston Feight and Harrie Schippers of PACCAR discuss their company's performance in a recent earnings call. They believe it is too early to talk about pricing in 2025 and expect used truck prices to stabilize in the second half of the year. They also mention that truckload rates have been soft and there is overcapacity in the market, but they are confident in the vocational side of the market through 2025. They cannot predict when the market will turn, but estimate it could take a couple of quarters.

During a conference call, Michael Feniger asks Preston Feight about the pre-buy order process for trucks ahead of the EPA 27 emissions standards change. Feight responds by saying that they have a long history of emissions changes in the industry and that people tend to buy their product sooner when costs are involved. He also mentions that the market share gains are due to both having dominant products in growing categories and taking share from other products in the existing market. However, he is unable to provide an exact breakdown of how much of the market share gain is attributed to each factor.

The speaker discusses the strong sectors in which PACCAR is a leader and congratulates the company on its performance. They also mention the competitive environment in Europe and how the team is maintaining the premium position of the new DAF. The speaker also addresses the mix of regions and how it is not a significant factor in the company's overall margin. They highlight the strength of South America and Brazil in particular.

Preston Feight, CEO of PACCAR, believes that all teams are doing a good job of maintaining balance and is pleased with the performance of the company. When asked about managing the outlook for the future, Feight states that PACCAR takes a long-term strategic view and is focused on making smart investments for future growth. They are not too concerned about short-term market fluctuations and will continue to support their customers and gradually grow their share. Feight also mentions making investments in capital and products to support future growth.

During the earnings call, the company's CEO and CFO discussed the backlog and pricing of orders. They mentioned that about 50% of the backlog is filled and that the mix of fleet and retail orders can impact pricing. They also noted that the vocational market is strong and the company's inventory levels are healthy. They expect more clarity on fleet orders in the coming months. The call then ended.

This summary was generated with AI and may contain some inaccuracies.