Paccar's Revenue Drops 14% in Q2

Key Points

• Paccar (NASDAQ:PCAR) beat analyst expectations for the second quarter, posting GAAP earnings per share of $1.37 and revenue of $7.51 billion for Q2 2025.

• Net income (GAAP) and truck deliveries saw sharp year-over-year declines, but the Parts segment set a new quarterly record.

• Margins were pinched by tariffs, but management increased the quarterly dividend by 10% to $0.33 per share.

• These 10 stocks could mint the next wave of millionaires ›

Paccar (NASDAQ:PCAR), the U.S.-based maker of Kenworth, Peterbilt, and DAF commercial trucks, reported its second-quarter results on July 22, 2025. The most important news: the company surpassed analyst forecasts for both profit and revenue (GAAP) in Q2 2025. Earnings per share (GAAP) came in at $1.37 compared to the estimate of $1.29, while revenue (GAAP) reached $7.51 billion versus the $7,001.8 million consensus. Still, each metric fell significantly from last year, with net income (GAAP) at $723.8 million, a 35.5% decrease compared to Q2 2024. The quarter highlights a company navigating a cyclical industry downturn and higher costs, but with stability from its Parts and Financial Services businesses.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Understanding Paccar’s Business and Focus Areas

Paccar is a leading global manufacturer of heavy-duty and medium-duty trucks, operating mainly through its Kenworth, Peterbilt, and DAF brands. Its vehicles are key for long-haul freight, construction and vocational purposes. In addition, the company supplies aftermarket parts and offers financing and leasing through its financial services arm. Products such as Kenworth trucks, Peterbilt trucks, and DAF heavy vehicles are sold in North America, Europe, and select global markets.

The company's success largely depends on the performance of its Truck segment, which historically delivers nearly three-quarters of total revenue. Parts and Financial Services provide a cushion of stable income through economic cycles. Key priorities for Paccar include maintaining production efficiency, keeping a durable and flexible supply chain, meeting strict environmental regulations, and investing in new truck technologies and zero-emission vehicles.

Quarter Highlights: Truck Slowdown, Parts Growth, Margin Pressures

The Truck segment faced a steep drop in both sales and profitability compared to Q2 2024 (GAAP). Total truck sales dropped 20.3% compared to Q2 2024. The segment's pretax profit was down by 63.1% compared to Q2 2024. Truck deliveries were 39,300 units, an 18.8% decrease compared to Q2 2024. The most pronounced delivery drop was outside Europe and North America, signaling weaker demand in certain regions. The company's brands maintained a 30.4% North American market share in the first half of 2025, but gains could not offset broad market softness.

Management specifically cited tariff impacts, explaining that existing contractual backlogs prevented immediate price increases. Costs linked to tariffs took effect before pricing could catch up, making this likely the margin low point if conditions stabilize. The company expects to better match price and cost going forward as new orders phase in.

The PACCAR Parts segment, which supplies replacement truck parts, continued to deliver results. Revenue rose 3.6% over last year to $1.72 billion, reaching a new record. Pretax profit (GAAP) improved slightly by 0.7%. This segment benefited from the growing number of connected PACCAR trucks in operation and investments in digital fleet services. Tariff-driven input costs can be passed through to customers more efficiently than in Truck manufacturing, as there is no order backlog in Parts, allowing cost increases to take effect almost immediately.

The Financial Services segment, which provides customer leasing and financing solutions for new and used PACCAR trucks, saw a 7.4% revenue increase and a 10.8% gain in pretax profit compared to Q2 2024. The segment reported improved results from its large portfolio of financed vehicles and the recovering used truck market. PACCAR Financial issued $1.84 billion in new debt during the first half of 2025, strengthening funding for continued growth. Expansion into new used truck centers, including a facility in Warsaw, underlines the company’s global reach in funding and asset management.

Several one-time and trend-related events appeared this quarter. Higher tariffs and cost inflation compressed truck margins in the first half of 2025. The company took a $350 million pre-tax provision in Q1 2025 for European legal matters, though this did not impact the second quarter specifically. Looking at shareholder returns, the quarterly dividend was increased by 10% to $0.33 per share compared to Q2 2024, continuing a policy of consistent dividends and reflecting management’s confidence in the company’s cash generation.

First mention of each family of products clarified: Kenworth and Peterbilt trucks are heavy- and medium-duty trucks; DAF produces similar vehicles for European and global markets; PACCAR Parts supplies aftermarket truck parts; and PACCAR Financial Services provides financing and leasing for truck buyers and dealers.

Looking Ahead: Guidance and Industry Signals

It reiterated expectations for continued parts growth and a stable financial services business, while remaining cautious about truck demand in the coming quarters, as discussed in management commentary for Q1 2025. North American truck market retail sales are forecast to be between 230,000 and 260,000 units for 2025, with less-than-truckload and vocational demand holding up better than long-haul truckload. Inventory levels are below the industry average at about 3.1 months of retail as of Q1 2025, giving the company flexibility as demand patterns shift.

The company continues to invest in updated manufacturing, alternative powertrains such as electric vehicles, and regulatory compliance in anticipation of stricter emissions standards in the U.S. and Europe. Larger risks in the months ahead include the possibility of changes in tariffs, evolving emissions policy, and any new cost challenges from supply chains.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,055%* — a market-crushing outperformance compared to 180% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

See the stocks »

*Stock Advisor returns as of July 21, 2025

JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.