PCAR · Q4 2025 Earnings

Cautious

Paccar

Reported January 27, 2026

30-second summary

Q4 truck revenue fell 21% YoY to $4.52B and group revenue $6.82B (-14% YoY), with Truck/Parts/Other gross margin landing at 11.97% — 3bps below the "around 12%" Q4 guide and the cyclical low management telegraphed in Q3. The signal that matters: management restored the upper end of the FY2026 US/Canada Class 8 industry range to 270K (from the 245K Q3 cut), framed tariff policy as a tailwind rather than a headwind for the first time in three quarters, and Q&A confirmed Q1 gross margin steps up to 12.5%–13% as Section 232 becomes a full-quarter benefit. Parts pre-tax income hit $415M — a third consecutive quarter near the $410–417M band — and FY parts revenue grew 4.2% against truck -20.7%, confirming the structural decoupling.

Headline numbers

EPS

Q4 FY2025

$1.06

Revenue

Q4 FY2025

$6.82B

-13.7% YoY

Gross margin

Q4 FY2025

12.0%

Operating margin

Q4 FY2025

8.0%

Key financials

Q4 FY2025

Metric	Q4 FY2025	YoY	Q3 FY2025	QoQ
Revenue	$6.82B	-13.7%	$6.67B	+2.2%
EPS	$1.06	—	$1.12	-5.4%
Gross margin	12.0%	—	12.5%	-53bps
Operating margin	8.0%	—	8.6%	-57bps

Guidance

PACCAR reaffirms near-term execution while pivoting to a cautiously optimistic FY2026 outlook supported by tariff clarity and freight fundamentals recovery, though South American market headwinds persist.

Guidance is issued for the full year only, refreshed each quarter. Prior and new below are the same FY updated this quarter.

Actuals vs prior guidance

Metric	Period	Prior guide	Actual	Δ	Result
New Truck Deliveries	Q4 FY2025	approximately 32,000 units	32,900 units	in-line	Met
Truck, Parts and Other Gross Margin	Q4 FY2025	around 12%	11.97%	-3 bps below guide	Missed

New guidance

Metric	Period	Guide	YoY
Capital projects investment	FY 2026	$725-$775 million	—
Research and development expenses	FY 2026	$450-$500 million	—
U.S. and Canada Class 8 truck industry retail sales	FY 2026	230,000-270,000 trucks	—
European above 16-tonne truck industry registrations	FY 2026	280,000-320,000 trucks	—
South American above 16-tonne truck market	FY 2026	100,000-110,000 trucks	—

Segment KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
Truck	$4.52B	-20.6%
Parts	$1.74B	+4.2%
Financial Services	$0.57B	+4.5%

Other KPIs

Q4 FY2025

Segment	Q4 FY2025	YoY
United States and Canada	$3.72B	-19.8%
Europe	$2.03B	+12.3%
Other	$1.07B	-26.7%
New Truck Deliveries (Q4)	32,900 units	—
New Truck Deliveries (FY2025)	144,200 units	—
PACCAR Parts Pretax Income (Q4)	$415.0 million	—
PACCAR Financial Services Assets	$22.8 billion	—
PFS Portfolio	226,000 trucks and trailers	—
PFS Retail Market Share	27%	—
Kenworth/Peterbilt Class 8 Market Share	30%	—
Operating Cash Flow (FY2025)	$4.42 billion	—

Management tone

Tariff uncertainty (Q2) → Section 232 as dated margin path (Q3) → Tariff clarity as 2026 tailwind (Q4).

The tariff narrative has fully inverted from headwind to tailwind in three quarters. Q2: "difficult to forecast third quarter margins" because of tariff structure. Q3: November 1 named as Section 232 implementation date, with Q4 as the peak-pain quarter. Q4: the press release frames "clarification of tariff policy" as a positive driver. In Q&A, management told Wells Fargo's Jerry Revitch that PACCAR had previously been at a competitive disadvantage and now expects an advantage "to flow through margins and market share as the year progresses and competitors take tariff costs to market." The shift signals that >90% US production — framed defensively in Q2 — is now being positioned as a share-gain mechanism.

Margin guidance returned, and it's directional. Q2 management explicitly refused to guide Q3 margin. Q4 management told Evercore's David Grasso that Q1 gross margin will expand from "12% in Q4 to 12.5%-13% in Q1" with price-cost net positive. The willingness to put a 50-bp step-up on the record is the cleanest reversal of the Q2 forecast-refusal posture, and it implies Section 232 contributes meaningfully even before the full-quarter benefit materializes.

The 2026 upside levers narrowed from "three external triggers" to "freight + tariff stability." Q3 named three: tariff clarity, EPA 35mg NOx, and freight market recovery. The Q4 press release reduces this to "clarification of tariff policy and emissions regulations, which combined with early improvements in freight fundamentals." The reduction in named conditions is itself a confidence signal — management is no longer hedging on emissions policy reversal as a downside risk.

Order momentum was specifically validated rather than assumed. In Q3, Q4 NA order books were 67% filled. In Q4 Q&A, management told Morgan Stanley's Angel Castillo that January order intake "continued at December's significant level," Q1 production is "mostly full," and bodybuilders and vocational segments are placing replenishment orders. This is more granular forward-order validation than any prior quarter in the series.

South America got quieter. Q3 raised the South America range; Q4 lowers it (100–110K vs 115K FY25 actual) with no commentary in the press release on regional softness. The asymmetric disclosure — fully framing NA and Europe upside, omitting South America downside — is the one piece of hidden caution in the print.

Q&A highlights

David Grasso · Evercore ISI

Walk through expected margin improvement from 4Q to 1Q despite flat deliveries, and quantify the price-cost dynamic in trucks for 4Q and how Section 232 benefits Q1.

Management attributed margin improvement to: (1) one month of Section 232 tariff benefit in Q4 vs. full quarter benefit in Q1; (2) manufacturing complexity in Q4 from converting factories for local-for-local production; (3) lower overtime and higher overtime in Q4 not expected to recur in Q1; (4) margin expansion from 12% in Q4 to 12.5%-13% in Q1. Price-cost expected to be net positive in Q1 due to cost reductions and tariff stability.

4Q gross margin: 12%1Q forecasted gross margin: 12.5%-13%Section 232 tariff effective November 1st, 2024Higher overtime in Q4 due to year-end delivery push

Jerry Revitch · Wells Fargo

Aftermarket performance by region in January, European production strength vs. seasonality, and strategy on unit profitability vs. market share given Section 232 advantage.

Q1 aftermarket parts forecast: 3% growth YoY. Full-year parts growth forecast: 4%-8%, accelerating as truck market improves. European heavy-duty market at 297,000 units, no specific regional focus but recognition of premium truck positioning (Fleet Truck of Year, International Truck of Year awards). Regarding Section 232, management noted they had previous disadvantage; now expect advantage to flow through margins and market share as year progresses and competitors take tariff costs to market. Cautioned that advantage won't come through immediately in Q1 given competitive dynamics.

Q1 parts growth forecast: 3% YoYFull-year parts growth guidance: 4%-8%European heavy-duty market: 297,000 unitsQ1 market expected similar strength to 2025

Stephen Fisher · UBS

Confirm production dynamics in Q4, impact of local-for-local production shift on the 32,900 truck deliveries, and regional breakdown for flat Q1 deliveries.

32,900 Q4 deliveries were in line with expectations. Only a few hundred units of variance attributable to manufacturing transition inefficiencies related to shifting production from Mexico and Canada for local-for-local model. Europe delivered slightly more units than expected, North America slightly less due to cadence changes and strong order intake. Q1 expected flat overall but with U.S./Canada up slightly and Europe down slightly due to Q4 year-end strength in Europe.

4Q deliveries: 32,900 trucksOnly ~few hundred units variance from planQ1 deliveries: expected comparable level to Q4U.S./Canada: up in Q1

Angel Castillo · Morgan Stanley

Detail on order uptick continuation in January, percentage of order slots filled for Q1/Q2, and specific pockets of strength (vocational, EPA pre-buy, etc.) given unchanged North America unit guidance.

January orders continued at December's significant level. Q1 production mostly full; Q2 visibility to be discussed at next earnings. Order strength across multiple segments: vocational remains steady, bodybuilders showing significant orders to replenish inventory, LTL market steady. Management indicated confidence in full-year growth potential but maintained unchanged guidance because they already raised outlook from prior ACT expectations and remain comfortable with range of 230,000-270,000 units for U.S./Canada.

January order intake: continued at December levelsQ1 capacity: mostly fullStrong bodybuilder orders notedVocational segment orders significant

Scott Group · Wolf Research

If truck rate increases are driven by driver supply constraints rather than demand growth, how does that affect order sustainability? What's the mix between replacement vs. growth trucks, and outlook for used truck market?

Management acknowledged driver supply constraints may limit order growth to certain carrier segments. Lower-wage drivers working at spot rates have less purchasing power; established carriers with better rate positioning have improved cash flow and ability to purchase trucks. Expects used truck market to strengthen as fleet profitability improves, offset temporarily by CDL enforcement impacts. Used truck values up 4% YoY; expects continuation as EPA 27 increases new truck prices.

Used truck values: +4% YoYExpecting continued used truck value appreciationDriver enforcement rules creating temporary used truck headwindsFleet rationalization ongoing

Answers to last quarter's watch list

Q4 gross margin vs. the ~12% guide. Truck/Parts/Other gross margin landed at 11.97% — 3bps below the guide. Inside rounding, but technically a miss. Management attributed the shortfall to one month (not three) of Section 232 benefit and Q4 manufacturing complexity from the local-for-local transition. Q1 is guided to 12.5%–13.0%, so the implementation timeline is corroborated even if Q4 absorbed slightly more pain than indicated. Status: Continue monitoring

Section 232 realized pass-through into Q1 2026. Q1 gross margin guided to 12.5%–13% — within sight of but not yet at the 13% underlying anchor management cited in Q3. The Q&A framed the surcharge mechanism implicitly as fading rather than removed in one step; full pass-through is a Q2/Q3 2026 question, not a Q1 one. Status: Continue monitoring

2026 NA Class 8 order book fill progression. Q1 production "mostly full" with January orders at December's significant pace. Management didn't disclose a Q1 or Q2 fill percentage but the order tenor advanced clearly from the 67% Q3 baseline. The narrative is intact. Status: Resolved positively

35mg NOx legal status. Status quo — the press release referenced "emissions regulations" clarification as a positive, with no mention of the 35mg standard being reversed. Management's planning baseline holds. Status: Resolved positively

Parts pre-tax sustainability above $400M. Q4 parts pre-tax came in at $415.0M, completing three consecutive quarters in the $410–417M band ($416.5M Q2 → $410.0M Q3 → $415.0M Q4). The structural-decoupling floor is established. Status: Resolved positively

NA Class 8 industry retail relative to the 230–245K cut range. FY25 actual landed at 233,000 — at the bottom of the Q3-cut range and below the original 230–260K range. Not the deeper-cycle scenario (sub-230K), but at the soft end. The 2026 guide of 230–270K implies management expects a similar floor with significant upside contingent on pre-buy. Status: Resolved negatively (FY25 landed at the low end)

What to watch into next quarter

Q1 gross margin vs. the 12.5%–13.0% guide. A print at or above 13% would confirm Section 232 is at full benefit and underlying margin equals or exceeds management's ex-tariff anchor; below 12.5% would indicate the share-vs-margin tradeoff Jerry Revitch flagged is starting to pull margin lower.

NA Class 8 order book Q2 visibility. Q1 is "mostly full"; management said Q2 visibility will be discussed next earnings. Whether Q2 reaches 50–60% fill by April tests whether the pre-buy is genuine or front-loaded into Q1.

Q1 parts pre-tax vs. the $410–417M band. Q1 is a seasonally weaker parts quarter than Q2; sustaining above $400M would extend the structural-decoupling thesis through a full year. Below $400M for the first time in five quarters would test it.

South America 2026 trajectory. The 100–110K guide is the only quietly cautious number in the print. Whether Q1 South American truck revenue contracts >20% YoY would confirm regional softness is materially worse than the headline 4–13% market-size decline implies.

EPA 35mg NOx legal status. Any reversal commentary in Q1 would force management to walk back one of the named 2026 levers; status quo extends the planning baseline.

Pricing discipline as Section 232 surcharges normalize. Whether competitors raising prices to absorb tariff costs allows PACCAR to capture the differential as either margin or share — the strategic choice Revitch surfaced is the most consequential 2026 swing factor.

Sources

PACCAR Q4 2025 press release (SEC filing, Exhibit 99.1): https://www.sec.gov/Archives/edgar/data/75362/000119312526023374/pcar-ex99_1.htm
PACCAR Q4 2025 earnings call Q&A (extraction-sourced; no full prepared-remarks transcript available)

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