The paragraph is from PACCAR's Fourth Quarter 2024 Earnings Conference Call. Ken Hastings, the Director of Investor Relations, introduces key company executives and notes that some information discussed will be forward-looking. Preston Feight, CEO, presents highlights of PACCAR’s financial performance for 2024, including annual revenues of $33.7 billion, net income of $4.2 billion, and an after-tax return on revenues of 12.4%, marking the second highest profit in the company's history. The strong performance is attributed to the profitability of new truck models and record results in the Parts division and PACCAR Financial Services.

Over the past decade, PACCAR invested $8.6 billion in new products and technologies, leading to significant financial achievements. The company has seen consistent net income for 86 years and declared a $4.17 dividend per share in 2024. Recent financials report $7.9 billion in fourth-quarter revenues, with Kenworth and Peterbilt increasing their market share in both Class 8 and medium-duty trucks. The US and Canadian Class 8 truck market is projected to consist of 250,000 to 280,000 vehicles, amid a steadily improving vocational and less-than-truckload market. In Europe, DAF’s trucks boast a competitive edge, with anticipated registrations for vehicles over 16 tonnes ranging from 270,000 to 300,000 in 2025, amid projected modest economic growth.

In the previous year, the South American market for vehicles over 16 tonnes was 119,000, and similar figures are expected this year. DAF held a 10% market share in Brazil, reflecting a 23% production increase for 2024. DAF trucks are expanding sales in Mexico and the Andean region. PACCAR's Truck, Parts, and other gross margins were solid at 15.9% in Q4, higher than previous cycles. PACCAR delivered 43,900 trucks in Q4 and expects around 40,000 deliveries in Q1 2025, with similar gross margins of 15.5% to 16%. Highlights for 2024 include progress on a U.S. battery manufacturing joint venture, DAF's U.K. recognition, TRP's 30th anniversary, Peterbilt's sustainability award, and Kenworth's 50th anniversary in Ohio. Looking forward to PACCAR's 120th anniversary in 2025, Harrie Schippers highlights PACCAR Parts' record revenues of $6.7 billion and $1.71 billion pre-tax profit, with gross margins averaging 30.9%.

In the current freight environment, PACCAR is experiencing growth, with Part sales expected to rise by 2% to 4% this year. PACCAR Parts is benefitting from long-term investments aimed at enhancing vehicle uptime and customer convenience, and its aftermarket parts business remains profitable throughout business cycles. The addition of a new parts distribution center in Germany supports PACCAR's strategy to increase market share in Europe's largest truck market. PACCAR Financial Services reported substantial pre-tax income and maintains a strong portfolio with excellent credit quality. The company is expanding its used truck centers, including a new location in Warsaw. Last year, PACCAR invested significantly in capital projects and R&D, resulting in a 25.5% return on invested capital. For this year, PACCAR plans further investments in capital projects and R&D, focusing on new engine technologies, battery electric powertrains, advanced driver assistance systems, and vehicle connectivity, while expanding manufacturing capacity globally.

In the discussion, Preston Feight addresses Tami Zakaria's query about PACCAR's delivery guidance by geography. He explains that in the U.S., Class 8 truck deliveries are expected to be flat or slightly up in the first quarter, while the medium-duty market is normalizing from robust activity. The fourth quarter saw a Euro 6 pre-buy in Mexico due to regulatory changes, affecting future comparisons. Other factors impacting delivery guidance include reduced production days outside the U.S., particularly in South America, and typical year-end inventory adjustments influenced by strong supplier performance.

The paragraph contains a discussion involving Preston Feight, who expresses satisfaction with the company's joint venture, Amplify Cell Technologies, with Cummins and Daimler. He indicates that the strategic objective is to offer a full portfolio of powertrain choices, encompassing battery electric vehicles and hybrids. Feight asserts that the joint venture will help provide the most competitive and high-quality batteries. Kyle Menges of Citi then asks about dealer overordering and order resilience in Class 8, highlighting inventory levels and order backlogs. Feight responds that customer orders seem solid, with Kenworth and Peterbilt having lower inventory levels than the industry average, indicating that inventory is well-managed. Lastly, Menges asks for more details on the U.S. medium-duty market.

The paragraph discusses the outlook for the medium-duty truck market, with Preston Feight noting that after a strong year with steady builds and an anomaly due to a mirror factory fire boosting third-quarter deliveries, they anticipate a return to historically normal levels. The company is optimistic about its new products, such as the 2.1-meter wide Kenworth and Peterbilts, which have been well-received and have helped grow its market share in the medium-duty sector from 14.5% to 18%. They expect the market to strengthen in the second half of the year. Additionally, Steven Volkman from Jefferies inquires about the apparent decline in revenue per truck, attributing it to factors like pricing and mix, with Harrie Schippers mentioning regional mix and reduced activity in North America due to holidays in the fourth quarter.

In the paragraph, there is a discussion about financial impacts and future expectations within a company's operations. They note that unfavorable foreign exchange rates, particularly a strong dollar, have contributed to a reduction in average sales prices in Europe for the fourth quarter. The company is having ongoing discussions with customers about potential price increases related to 2027 regulations, predicting adjustments of $10,000 to $15,000, although details are not final. Regarding truck pricing and gross margin trends, they expect gross margins to remain steady in the first quarter, with signs of improvement as truckload carriers return to the market. Additionally, they mention that PACCAR Financial's used truck inventory is at low and healthy levels, which is a positive indicator for the market.

In the paragraph, Rob Wertheimer inquires about the demand for hybrid trucks, noting past resistance in the auto and truck industries to hybrid systems due to a preference for fully electric vehicles. Preston Feight responds by highlighting the potential benefits of hybrid systems, such as improved fuel efficiency and reduced greenhouse gas emissions. He acknowledges that while there is an added cost, a solid business case can be made for hybrids independent of regulatory requirements, especially in the US and Europe. The discussion then shifts to Steven Fisher from UBS, who asks about maintaining stable margins despite a 10% reduction in production. Preston Feight attributes this stability to the strong performance of their trucks, citing excellent fuel economy, reliability, and reduced warranty costs.

The paragraph is from a discussion involving Steven Fisher, Preston Feight, and Jamie Cook regarding market trends and pricing stability in the industry. Steven Fisher inquires about the current state of pricing and margin stability during the downturn, expressing interest in whether they have reached the lowest point for the year. Preston Feight responds by suggesting a positive trend expected by 2025, with improvements potentially starting in the second quarter. Jamie Cook then asks for specifics on price costs for trucks and parts in the fourth quarter and their regional implications for 2025. Additionally, Cook queries whether the first quarter represents the lowest margin point for the entire company or just for truck margins, and questions if sales growth and improved margins can be expected in the second half of the year. Feight acknowledges that these questions have been addressed previously in the discussion.

The paragraph features a discussion between Jamie Cook, Harrie Schippers, and Preston Feight regarding financial performance and expectations for future margins. Despite a minor decrease in price versus cost in Q4, the company anticipates improved trends and strong parts margins in the coming quarters. When asked about geographical specifics, Schippers notes they don't provide that detail. Cook inquires about incremental margins by the second half of 2025, and Schippers and Feight express confidence in margin improvements as the market develops. Tim Thein from Raymond James asks about order activity and backlog details for North America and Europe, to which Feight responds positively.

The paragraph features a conversation between multiple individuals discussing the company's backlog and the impact of foreign exchange rates on margins. It begins with an update on backlog levels, indicating they are about 75% full in the first quarter and around half full in the second quarter. There is a mention that vocational influence, which was notable last year, is now stabilizing to traditional levels. The discussion then shifts to foreign exchange effects, where Brice Poplawski notes a $20 million negative impact on net income in the fourth quarter due to currency fluctuations. Harrie Schippers adds that this is considered in their guidance range of 15.5% to 16%. Angel Castillo from Morgan Stanley joins the conversation, confirming audio clarity with Preston Feight.

In the article, Angel Castillo asks about the reduction in R&D expenses for the year and the phased approach to the Amplify JV project. Preston Feight responds by stating that R&D expenses are actually expected to increase by about 5% due to numerous projects, although the Amplify project is separate from this. He mentions they've started building for Amplify and will adjust capacity based on market demands for EVs or hybrids. Castillo also inquires about potential improvements in the TL market, noting prior comments about "green shoots" and potential recovery by the second quarter. Feight adds that they've begun to see improvements in spot rates.

The paragraph features a discussion between Angel Castillo, Preston Feight, and David Raso regarding market conditions and pricing strategies. Preston Feight notes that reduced market capacity is benefiting strong carriers, and low used market inventories indicate a market shift. David Raso questions the impact of market strengthening on the pricing of the 2026 model year trucks and the effect of recent White House executive orders. Preston Feight responds that PACCAR is prepared for regulatory changes and has developed suitable technology, such as low NOx engines in California. He anticipates strengthening price positions for Kenworth, Peterbilt, and DAF trucks as the market improves, extending beyond 2025.

The paragraph features a conversation between David Raso and Preston Feight regarding the shipping timeline for model year 2026 vehicles, with Feight clarifying that Raso's expectation of an April shipment doesn't align with their schedule. They agree to discuss further offline. The conversation then shifts to Jerry Revich from Goldman Sachs, who asks about the operating costs per truck over the next few quarters. Harrie Schippers explains that the cost per truck increased in 2024 due to additional features, mainly in Europe, and these costs are expected to remain stable into 2025. Revich also touches on the topic of EPA 27, accepting that while the current plan is to move forward, there could be changes from the government.

In the paragraph, Preston Feight of PACCAR expresses confidence in the company's ability to adapt to changes in regulations, stating that the quality of its personnel makes it particularly nimble and responsive. In the event of differing regulations across states such as California versus the rest of the U.S., PACCAR is prepared to provide suitable products that meet these regulatory demands. Jeff Kauffman from Vertical Research Partners then shifts the discussion to financials, asking about the factors influencing a 4.9% decrease in revenue per truck. Harrie Schippers explains that about half of this impact is due to currency fluctuations, with the remainder largely due to a change in sales mix, as more sales occurred in markets outside the U.S. and Canada, where trucks are typically smaller and have lower average sales prices. Jeff also mentions a follow-up on David Raso's question.

In the paragraph, Preston Feight, a representative of PACCAR, discusses the company's approach to potential changes and competition in the industry. He views environmental changes and new regulations not as risks, but as opportunities to outperform competitors. PACCAR's local production in various countries helps mitigate risks like tariffs. When asked about how PACCAR would handle increased competition and potential pricing pressures from other OEMs, Feight emphasizes PACCAR's strategy of focusing on producing high-quality trucks to maintain their market position and possibly expand their market share over multiple business cycles.

The paragraph involves a discussion between Michael Feniger and Harrie Schippers about PACCAR's truck and parts sales performance. Schippers highlights that even though the overall market for auto parts sales declined by 2% to 3%, PACCAR's parts sales increased by 4%, showcasing strong performance by the PACCAR parts team. Going into 2025, PACCAR expects parts sales to grow by another 2% to 4%. Scott Group from Wolfe Research asks for clarification on why parts growth might slow in a market that is expected to be flat or up, compared to a previous year where the market was down but parts sales still grew.

The paragraph features a discussion about the parts market and its expected performance. Preston Feight explains that while parts sales haven't picked up yet, they performed well in Q1 and are expected to grow throughout the year. Harrie Schippers adds that part sales are closely related to freight activity, suggesting a similar growth pattern. Scott Group inquires about sales percentages for upcoming quarters and pre-buy activities, to which Preston responds that backlog levels are normal for the current business cycle, with discussions for orders in the second half of 2025 and 2026 underway. In a subsequent question, Mats Liss asks about the European market's progress towards 2025, and Preston indicates he will provide an overview, with Harrie potentially adding insights.

The European economy is expected to see slight growth, particularly in Germany, despite geopolitical factors affecting Central and Eastern European markets, which have been softer. Last year, overall European markets declined by 8%, with Western Europe down 5% and Central and Eastern Europe by around 20%. Countries like Poland and Lithuania were more affected, impacting companies like DAF, which has a strong presence there. However, looking towards 2025, there is optimism for market performance, which is favorable for PACCAR. DAF's capacity utilization in Europe is good, with investments in factories in the UK and Netherlands to ensure efficiency and preparedness for market growth. The first and second quarter coverage aligns with the group's average performance.

The paragraph concludes the call, with Preston Feight thanking participants and the host, Charlie, followed by the operator announcing the end of the call and instructing participants to disconnect.

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