PACCAR 4Q15 Earnings Call Notes

PACCAR (PCAR) Ronald E. Armstrong on Q4 2015 Results

2016 will be another good year for Class 8 trucks

“2016 will be another good year for the U.S. and Canadian Class 8 industry truck market with retail sales estimated to be in a range of 230,000 units to 260,000 units. Additional good news is that Peterbilt and Kenworth dealer inventories are in great shape entering this year”

Seeing more used trucks coming to market

“I think what we’re seeing is there are more used trucks coming into the market, and that’s dampening used truck prices a bit. But the great news is that the Kenworth and Peterbilt products continue to earn a premium relative to the competition.”

Cancellation activity is normal, economic fundamentals are positive

“Cancellation activity in our operations are very normal. There’s nothing unusual that is happening in that arena. And in terms of where we’re at in the cycle, I think that’s to be determined. The economic fundamentals are positive, and we see that we’re going to track what the demand is, and we think the demand is going to be a good market for 2016.”

Lower commodity costs are a bit of a benefit

“Cost, I think there’s probably a little bit of downward momentum on prices with commodity cost reductions. so that’s a bit of a benefit. But everybody is getting that same benefit in the industry. Our factories and businesses around the world do a great job of managing their cost structure. And our purchasing groups around the world do a great job of procuring and working closely with our suppliers”

27% share of heavy duty truck market

“We obviously continue to push the number. We’re 27% share of the heavy-duty market, 17% of the medium-duty market in North America, so there’s lots of upside for us.”

Several years away from autonomous trucks, but following developments closely

“So all of our truck divisions and our engineering teams around the world are involved in evaluating all the technologies that can benefit our customers, including the technologies that will support autonomous driving. We’ve demonstrated autonomous vehicles at various exhibitions in North America. Our team in Europe has also demonstrated their autonomous capabilities with tuning activities, working with government and educational institutions. So a lot of work in that area, working closely with suppliers who have the technologies that can support that activity. So it’s an ongoing activity. I think we’re several years away from seeing that in the truck business. But we’re right at the forefront of all the developments that are going on in that arena.”

Ken Hastings – Director of Investor Relations

Freight activities look good

“Obviously the on-highway business is supported by strong freight tonnage metrics. They’ve been pretty flat but at a very high level. I think the last numbers that came out were like the second highest level on record. So, freight activities look good, the estimation for growth for next year for North America is 2% to 3% growth. So, consumer demand is strong. And so, we see a lot of positives that are going to support a good market.”