PACCAR (NASDAQ:PCAR) reported second-quarter revenue of $7.5 billion and net income of $752 million, up 24% from the first quarter, as higher truck production and favorable operating conditions supported its truck division.
Chief Executive Officer Preston Feight said the company increased factory build rates globally during the quarter. Truck deliveries rose to 38,700 units from 33,000 in the prior quarter, and PACCAR expects third-quarter deliveries of about 42,000 units, with higher production partly offset by the typical European summer shutdown period.
Parts and financial businesses post strong results
PACCAR Parts reported record second-quarter revenue of $1.75 billion and pretax income of $417 million. Its gross margin rose to 29.8%, according to President Kevin Baney.
Baney said increased truck utilization is beginning to generate more parts and service activity. Revenue from the company’s Fleet Services program increased 8% in the quarter, which he described as an indication that customers are increasing parts purchases. PACCAR expects full-year parts sales growth of 3% to 5%, with growth accelerating in the second half and trending toward the higher end of that range.
PACCAR Financial Services generated pretax income of $124 million. Baney attributed the performance to stable finance margins and strengthening conditions in used-truck markets.
Truck market outlook improves
Management said the U.S. and Canadian heavy-truck market is strengthening as freight rates increase and the regulatory environment becomes clearer. PACCAR estimated first-half retail sales in the market at 105,000 trucks and projected approximately 145,000 retail sales in the second half, implying a full-year market of roughly 250,000 units.
Feight said spot freight rates were up about 20% and contract rates had increased 6.5%, helping improve customer operating conditions. He also said customers have deferred capital spending and kept trucks in service longer amid difficult operating conditions in recent years, but are now beginning to return to more normal replacement cycles.
For Europe, PACCAR forecast a 2026 market for trucks above 16 tons of about 310,000 vehicles. The company expects the South American market for trucks above 16 tons to range from 100,000 to 110,000 vehicles this year.
Margins supported by production, costs and tariffs
PACCAR’s truck, parts and other gross margin increased to 14.4% in the second quarter from 13.1% in the prior quarter. The company forecast a third-quarter margin of about 14.5%, followed by a further increase in the fourth quarter.
Feight attributed the stronger second-quarter margin to higher truck volume, local-for-local manufacturing, cost controls and favorable pricing relative to costs. He said local production also provided tariff benefits. Management said there was a modest benefit related to International Emergency Economic Powers Act tariffs in the second quarter that should continue into the third quarter, while the broader tariff effect looking ahead is tied to Section 232 tariffs.
Third-quarter margin progression is expected to be moderated by a larger truck mix relative to parts, as well as a shift toward more fleet trucks and fewer vocational trucks, Feight said. Management nevertheless expects profit to increase as production rises.
EPA proposal could reshape 2027 purchasing
Management also discussed the Environmental Protection Agency’s July proposal clarifying the timeline for 35-milligram nitrogen oxide engines. Under the proposal, customers could purchase current-generation engines next year while paying a non-conformance fee, allowing manufacturers and customers more time to validate the new technology.
Feight said the proposed non-conformance fee would be in the range of $6,000 to $7,000 per truck, while the cost of a fully compliant 35-milligram engine would likely be higher. PACCAR plans to offer its current engine product to customers while gradually introducing the new engines during the year, subject to the rule’s final form.
The company said the fee would be passed through to the government rather than retained by PACCAR, and therefore should not affect margins. Feight said the regulatory approach could smooth the anticipated pre-buy dynamic and support a healthy truck market in 2027.
PACCAR expects capital investments of $700 million to $750 million in 2026 and research and development spending of $450 million to $480 million. The investments include flexible manufacturing, clean diesel engine development, hybrid and electric powertrains, and connected vehicle services.
About PACCAR (NASDAQ:PCAR)
PACCAR Inc is a global technology leader in the design, manufacture and customer support of light-, medium- and heavy-duty commercial vehicles. The company’s products are marketed under well-known brand names including Kenworth, Peterbilt and DAF and span vocational and long-haul applications. PACCAR’s core business includes vehicle engineering and assembly as well as the supply of components and proprietary powertrain systems designed to meet regulatory and customer performance requirements.
In addition to truck manufacturing, PACCAR operates a comprehensive aftermarket parts business, distributes used trucks and provides commercial vehicle financing and leasing through its financial services operations.
