PACCAR Inc. (NASDAQ:PCAR), a leading truck manufacturer, announced strong first-quarter earnings with revenues reaching $8.74 billion and net income of $1.2 billion. The company's parts division, PACCAR Parts, recorded a record quarterly pretax income of $456 million, while PACCAR Financial Services also had a strong quarter with pretax income of $114 million. The U.S. and Canadian Class 8 truck market is estimated to be sizable, and PACCAR has full order books for the upcoming quarters. Despite a softer European market, PACCAR is optimistic about its new truck models and plans significant investments in battery technology and a new factory.
Key Takeaways
- PACCAR reported first-quarter revenues of $8.74 billion and net income of $1.2 billion.
- PACCAR Parts achieved a record quarterly pretax income of $456 million.
- PACCAR Financial Services had a successful quarter with pretax income of $114 million.
- The company announced plans to invest in a commercial vehicle battery joint venture and a new factory.
- PACCAR is optimistic about the market outlook for 2024 and beyond, despite some current softness.
Company Outlook
- PACCAR expects an excellent year in 2024 with a strong order book for the second and third quarters.
- The company is preparing for the upcoming 2027 emission cycle, expecting positive market responses in 2025 and 2026.
- PACCAR anticipates that its market share will increase due to a stable and solid delivery schedule in the U.S. and Canada.
Bearish Highlights
- Softness in the European truck market, notably in Central and Eastern Europe, with deliveries expected to drop by 31% in the first half of the year.
- The Truckload segment is currently soft, and higher interest rates are making trucks more expensive to lease.
Bullish Highlights
- PACCAR's vocational market, representing about 25% of the total market, is exceptionally strong.
- The company's product strategy includes new trucks, engines, and alternative energy capabilities to meet upcoming emission regulations.
- PACCAR engine launch in California is set for this year to meet emissions requirements.
Misses
- No specific financial misses were discussed during the earnings call.
Q&A Highlights
- Customers are paying attention to costs associated with new emission standards but are looking to avoid disruptions.
- PACCAR's parts market share is expected to benefit from expanded warranty provisions as the base of 2027 emission trucks grows.
- New truck pricing is up approximately 3%, with the ASP increase influenced by vocational market mix and regional sales differences.
In conclusion, PACCAR's first-quarter earnings call highlighted the company's robust financial performance, strategic investments, and optimistic outlook for the future despite some market challenges. With a focus on innovation and market share growth, PACCAR is positioning itself to navigate the evolving truck market landscape effectively.
InvestingPro Insights
As PACCAR Inc. (PCAR) continues to navigate the truck manufacturing market with strategic investments and a focus on innovation, real-time data and insights from InvestingPro provide a deeper look into the company's financial health and stock performance.
InvestingPro Data:
- PACCAR's market capitalization stands at a robust $55.6 billion, reflecting the company's significant presence in the industry.
- With a P/E ratio of 12.03 and an adjusted P/E ratio for the last twelve months as of Q4 2023 of 10.97, PACCAR is trading at a valuation that suggests potential for investors, especially when considering its near-term earnings growth.
- The company has experienced a revenue growth of 21.89% over the last twelve months as of Q4 2023, indicating a strong financial performance despite market fluctuations.
InvestingPro Tips:
- PACCAR has demonstrated a commitment to shareholder returns, having raised its dividend for 3 consecutive years, and remarkably, maintained dividend payments for 54 consecutive years.
- Analysts have revised their earnings upwards for the upcoming period, suggesting that there may be positive sentiment surrounding the company's future financial performance.
For investors looking to delve deeper into PACCAR's financial metrics and stock performance, additional InvestingPro Tips can be found at https://www.investing.com/pro/PCAR. Currently, there are 17 additional tips available, which can provide further insights into the company's market position, profitability, and investment potential. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable information to guide investment decisions.
Full transcript - Paccar Inc (PCAR) Q1 2024:
Operator: Good morning and welcome to PACCAR’s First Quarter 2024 Earnings Conference Call. All lines will be in a listen-only mode until the question-and-answer session. Today’s call is being recorded and if anyone has any objection, they should disconnect at this time. I’d now like to introduce Mr. Ken Hastings, PACCAR’s Director of Investor Relations. Mr. Hastings, please go ahead.
Ken Hastings: Good morning. We would like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACCAR’s Director of Investor Relations. And joining me this morning are Preston Feight, Chief Executive Officer; Harrie Schippers, President and Chief Financial Officer; and Brice Poplawski, Vice President and Controller. As with prior conference calls, we will ask that any members of the media on the line participate in a listen-only mode. Certain information presented today will be forward-looking and involve risks and uncertainties, including general economic and competitive considerations that may affect expected results. For additional information, please see our SEC filings and the Investor Relations’ page of paccar.com. I would now like to introduce Preston Feight.
Preston Feight: Hey, good morning. Harrie, Brice, Ken and I will update you on our excellent first quarter results and business highlights. I’d like to begin by thanking PACCAR’s outstanding employees who do a great job providing our customers with the highest quality trucks and transportation solutions in the industry. PACCAR achieved excellent revenues and net income in the first quarter due to the strong performance of its truck, aftermarket parts and financial services businesses. PACCAR achieved revenues of $8.74 billion and net income of $1.2 billion. This is comparable to adjusted net income of $1.18 billion in the first quarter of last year. Truck parts and other gross margins were 19% in the first quarter. PACCAR’s margin is benefiting from investments in new truck models, good global performance and PACCAR Parts continued growth. PACCAR Parts achieved record quarterly pretax income of $456 million, 6% higher than the $439 million earned in the first quarter of 2023. 2024 quarterly parts revenues increased to $1.68 billion and we are pleased with the continued growth at PACCAR Parts after a record setting 2023. PACCAR Financial had a good quarter, achieving pretax income of $114 million. These results are comparable to the fourth quarter of 2023. Looking at the U.S. economy, GDP is estimated to grow 2.4% this year with a resilient labor market and healthy consumer spending. The vocational sector, where Peterbilt and Kenworth are the market leaders, remains strong with continued infrastructure investments. The less than truckload market is also performing well while being offset by a softer truckload segment. Kenworth and Peterbilt’s share in the first quarter was 30.3%, up from 27% in the same period last year. Overall, we estimate this year’s U.S. and Canadian Class 8 market to be in a range of 250,000 to 290,000 trucks. In the medium-duty markets, the new best-in-class Kenworth and Peterbilt models increased their combined first quarter share to 17%. We expect this year’s medium-duty market to be around 100,000 units. In Europe, economies and the truck market are softer this year. DAF’s premium new trucks provide customers with the latest technology and best operating efficiency. We project the 2024 European above 16-ton market to be in a range of 260,000 to 300,000 trucks. The South American above 16-ton truck market is expected to be in the range of 105,000 to 115,000 vehicles this year. In Brazil, DAF achieved a record 10.7% share in the first quarter, compared to 8.6% in the same period last year. DAF trucks are highly desired by customers in South America, and the region is an important part of PACCAR’s growth and success. In the third quarter of last year, PACCAR announced a commercial vehicle battery joint venture, and construction of the 21-gigawatt hour factory located in Mississippi is expected to begin this quarter. PACCAR anticipates investing $600 million to $900 million over the next several years in this factory to create cost efficient commercial vehicle batteries. PACCAR’s industry-leading trucks expanding parts business best-in-class financial services and advanced technology strategy position the company well for an excellent future. Harrie Schippers will now provide an update on truck deliveries, PACCAR Parts, PACCAR Financial Services and other business highlights. Harrie?
Harrie Schippers: Thanks, Preston. PACCAR delivered 48,100 trucks during the first quarter and anticipates second quarter deliveries to be around 48,000. PACCAR achieved excellent truck parts and other gross margins of 19% in the first quarter. We anticipate second quarter margins to be strong and in a range of 18% to 18.5%. PACCAR Parts had an outstanding first quarter with parts gross margins of 32.5%. We estimate parts sales to grow by 4% to 6% in the second quarter following last year’s record performance. PACCAR Parts’ excellent long-term growth reflects the benefits of investments in transportation solutions that increase vehicle uptime and convenience for customers. PACCAR’s aftermarket parts business provides strong profitability through all phases of the business cycle. PACCAR Parts has 19 parts distribution centers, or PDCs worldwide and is expanding its global distribution network with the construction of a new PDC in Germany which will open this year. PACCAR Financial Services benefited in the first quarter from excellent portfolio quality. Pretax income was $114 million. Used truck prices have normalized. With its larger portfolio and superb credit quality, PACCAR Financial is having another good year. PACCAR achieved an industry-leading return on invested capital of 28% in the first quarter. In 2024, we’re planning capital investments in the range of $700 million to $750 million and R&D expenses in the range of $460 million to $500 million. As we continue to invest in key technology and innovation projects these include clean diesel combustion engines, battery and hydrogen electric powertrains, advanced driver assistance systems and new connected vehicle services. PACCAR is also investing in manufacturing capacity to support future growth, including expansions at Kenworth, Peterbilt, PACCAR Mexico and at DAF in Brasil and Europe. We’re also investing in a new PACCAR engine remanufacturing facility in Columbus, Mississippi and in the new battery joint venture. We expect 2024 to be an excellent year. Thank you, but please to answer your questions.
Operator: Thank you. [Operator Instructions] Our first question for today comes from Tami Zakaria from JPMorgan (NYSE:JPM). Your line is now open. Please go ahead.
Tami Zakaria: Hi, good morning. Thank you so much. So my first question is on the deliveries for the second quarter, 48,000 around. Can you provide some color on how to think about deliveries by geography in the second quarter?
Preston Feight: Harrie, you want to offer any comments?
Harrie Schippers: Sure. I think, Tami, that the spread over geographies will be very similar to the first quarter. I don’t think we expect too many big changes. I think Europe, North America, the rest of the world should be at similar levels, more or less, some variation, of course, but pretty close.
Tami Zakaria: Got it. So my follow-up is how is the dealer inventory looking like in North America? The reason I ask seems like your deliveries in North America was up almost 14% year-over-year in the first quarter, but some industry data vendors suggest that retail sales were down in the quarter. So can you comment on the health of the inventory in the channel?
Harrie Schippers: Sure, happy to do that. First off, you look at our inventory, it’s really less than three months of inventory in the Class 8 side of it when the industry is a little bit higher than us. One of the things to think about when you consider PACCAR’s inventory is our strong vocational market share. If you think about the fact that a vocational truck takes maybe six months longer to put into service, it means there is additional time. So the stronger vocational market has a natural cadence to increasing inventory. But overall, our inventory is in very good shape and our market share is increasing. So we saw market share growth from 4Q to 1Q. We expect that we have the right mix of build and a healthy inventory. All feels pretty good.
Tami Zakaria: Wonderful. Thank you.
Harrie Schippers: You are quite welcome.
Operator: Thank you. Our next question comes from Angel Castillo of Morgan Stanley (NYSE:MS). Your line is now open. Please go ahead.
Angel Castillo: Hi, thanks for taking my question and congrats on a strong quarter.
Harrie Schippers: Thank you.
Angel Castillo: Just wanted to go back to your comment, I guess to the prior question. Thanks for – just in terms of the second quarter level of deliveries being similar to the first quarter, very strong deliveries in North America. If we kind of assume similar deliveries in the second quarter, we are run rating at quite positive rates. So I just wanted to kind of then bridge that to the lowered guide for shipments for the full industry for North America. So can you help us understand what is otherwise a very strong first half, inventories that seem to be kind of at a good level versus an industry view that seems to be little bit more modest? Is it market share? Is it something specific to the second half? Just again, help us bridge that and understand the change.
Preston Feight: Yes, sure, and happy to delve in that. First of all, the adjustment is a small adjustment and a mid-point of 270, we think is a great market in North America. But also I think what you’re seeing, we’re reflecting is PACCAR is that we’re continuing to demonstrate that our business is structurally stronger, that the margins are higher, that our market share is increasing in the U.S. and Canada, both in heavy duty and medium duty. And so we feel good about the way the market is going for PACCAR, which is obviously a place we know the most about, and we feel very good about it.
Angel Castillo: But maybe just from a broader industry perspective, was there anything in particular that kind of triggered the modest change?
Preston Feight: Yes, I think so. If we look at it and you said, we already mentioned the strong vocational market and the strong LTL market in our comments. And we do see the Truckload segment having continued softness, and you heard that in some of the public companies calls think that’s balanced against the fact that at some point, they want to stay on their cadence of buying and that cadence is going to need to continue. So that’s why we think the market is good for 2024. And then we would expect 2025 and 2026 to start to look even more positive as we head into the 2027 emission cycle.
Angel Castillo: That’s helpful. Thank you. And then just lastly on, just on the order books, could you just help us or just remind us where you’re at in terms of kind of 2Q order book fill rate, 3Q and 4Q, at least industry data, it seemed like 2Q and 3Q are pretty full. Just help us understand the cadence of what kind of those rates are at now.
Preston Feight: Yes. We have good fill in the second quarter, substantially full through all markets and filling nicely into the third quarter now.
Angel Castillo: Helpful. Thank you.
Preston Feight: Yes, great. Have a good day.
Operator: Thank you. Our next question comes from Rob Wertheimer of Melius Research. Your line is now open. Please go ahead.
Rob Wertheimer: Thank you. I had a question just on the interest rate sensitivity where, I guess, historically, trucks have been perceived to be a market that you can stimulate or not with rising lower rates from the Fed. And are you seeing that as rates have risen, has that been a major factor in either new or used purchases? And to your earlier comments, Preston, it seems like vocational is a great setup right now. Is that less sensitive to vagaries of interest rates just because of megaproject demand infrastructure or older fleets? So just maybe any comments you have on that risk. Thank you.
Harrie Schippers: Yes. Rob, starting on the interest rate, so higher interest rates, of course, make trucks more expensive to lease for many of our customers. So it does have some impact there. But please also bear in mind that customers are buying a new truck today, they replace a three or four-year old truck and that new truck comes with significant better fuel efficiency somewhere in the 7% to 12% range. So that offsets some of those higher interest rate payments. But of course, you’re right, our customers would like lower interest rates, they always do.
Preston Feight: But as a percentage of their total just out in what Harrie is saying, it’s a percentage of the total business for them, it’s not that significant. And I think we also look at it and say, like interest rates are in pretty normal levels from a long-term history standpoint. So with the economy moving along nicely with economic growth expected, we think it should be a good year.
Rob Wertheimer: Perfect. And then is vocational a different market. And I wonder if you could just comment on, you mentioned it stronger. It seems obviously stronger. Just any comment on the bifurcation between that and the long-haul segment, how big that is or how wide that is if it is more resilient given the infrastructure stuff.
Preston Feight: Sure. Great topic for us. And you think about it, we have over 40% share in the vocational market between Kenworth and Peterbilt. It’s – I mean, this is not a perfect number, but it’s roughly 25% of the total market. Obviously, it varies plus or minus. It’s exceptionally strong right now. Backlog is effectively full for that market through much of the year. We’re kind of stacked up at body builders. So that bodes well for Kenworth and Peterbilt for the balance of the year and going forward. And we think just as you look at the infrastructure spending in the country, and that’s continuing to happen, and it’s going to continue to be strong for us.
Rob Wertheimer: Okay. Thank you.
Preston Feight: You bet.
Operator: Thank you. Our next question comes from Steve Volkmann of Jefferies. Your line is now open. Please go ahead.
Steve Volkmann: Good morning, guys. Thanks for taking the question. I guess, we’ll get more detail in the queue, but can you just comment on how pricing is looking these days?
Preston Feight: Brice, do you want to share anything price?
Brice Poplawski: Yes. Our pricing is approximately 3% higher, and that’s very much in line with costs, Steven.
Steve Volkmann: Got it. Thank you for that. And then I’m curious, Preston, I think you said that you thought 2025 and 2026 would be improved or I think more positive, I wrote down here. Are you thinking that we will start to see some pre-buy as early as 2025? I know there’s a very big price increase coming here. Just your thoughts about how that plays out.
Preston Feight: Yes, I do. I think, obviously, the future is unknowable caveat that for you. But I would say that when you look at the buying cycle and trucks are being run and the fact that people are sensitive to those emissions changes, that it should help 2025 and 2026 be very strong years for the industry. And I think the question that everybody is kind of trying to figure out is when will that start and how significant will that initiation point begin. So for right now, what we look at is the trucks we’re producing are the best trucks we’ve ever built. They have great efficiency, and they’re not only great new trucks, but they’re also great used trucks in a few years. So between that spot, the 2025 and 2026 strengthening market I think, all feels really good.
Steve Volkmann: Great. Thank you, guys.
Preston Feight: You bet. Have a good day.
Operator: Thank you. Our next question is from Jaime Cook of Truist. Jaime, your line is now open. Please go ahead.
Jaime Cook: Hi. Good afternoon, and nice quarter. Just on the answer to Steve’s question, the 3% price that you said was in line with cost. Was that – can you, I guess, extinguish between truck OE and aftermarket? And then I guess, any commentary on pricing in the remaining three quarters. I’m just curious like your truck deliveries in the second quarter are similar to first, but margins are expected to be lower in the second quarter versus the first quarter. So any color on that? And then I guess, follow-up, Preston. Obviously, margins have been very strong. As we’re going through the cycle and demand is starting to, I guess, moderate. Any view on structurally how much you think your margins have improved versus potentially having to give a step back on price, just related to the market share and the new truck introduction. Just wondering how you’re structurally thinking about margin improvement this cycle. Thank you.
Preston Feight: You bet, Jaime. There’s a lot of questions in there, but thanks, it’s good to hear you. So I’d say to start with on the truck side, the price versus cost is 3 and 3. And on the Parts side, prices 3 and cost is 2. So that kind of helps you there kind of expect something maybe in a similar range as going forward through the course of the year. That all, of course, leads into your questions on margin and I look at the margins. One of the things we’re really proud of our people at PACCAR are creating these great trucks, these great parts business systems, because it is delivering these structurally stronger margins for everyone. Really happy with how that’s going. The fact that we delivered a 19% margin in a time when there’s a truckload carriers are a bit softer, feels really positive. And the fact that we shared with you the second quarter looks like 18% and 18.5%, really strong margins for the company, which is showing that we can demonstrate excellent performance through all parts of the business cycle. Really pleased with the team for what they’re doing.
Jaime Cook: Thank you.
Preston Feight: You bet.
Operator: Thank you. Our next question comes from Chad Dillard from Bernstein. Your line is now open. Please go ahead.
Chad Dillard: Hi. Good morning, guys.
Preston Feight: Hey, good morning.
Chad Dillard: So I was hoping to get your thoughts on the shape of the cycle. I think Preston, you mentioned that 2025 to 2026 would be a better year versus 2024. Just want to get a sense for whether you’re seeing a bottom in orders, like what gives you that confidence? And then do you think capacity needs to leave the market before you see an order rebound?
Preston Feight: Well, I think that right now, if I get with you, Chad, it’s – what we’re seeing is truckload sector, people want to keep buying trucks. They’re concerned about getting aged inventory. They want to stay on buying cycle. I think that there is capacity out there, obviously. It’s a very normal cycle is what it feels like right now, a healthy normal cycle. And their question is, when does this thing turn and when do they need to make sure that they’re continuing to get their orders placed. So the conversations are their interest in the future and what’s that going to look like? Is it three months from now, six months from now, a year from now, that they need to make sure they have acquired the capital and the trucks that they need.
Chad Dillard: Got it. That’s helpful. And then just – I’d like to get a little bit of color on your product strategy as you’re approaching the prebuy. I know you guys did a pretty good job in Europe when there’s a regulation change and introduced some new products that are real time with that. Just any color on how you’re thinking about like the next couple of years on that?
Preston Feight: On our product strategy, let’s share it. First of all, again, a shout out to the team, what they’ve accomplished. There are a couple of things I’d like to mention on that. One is from a product strategy standpoint, we just introduced the new model 589 at Peterbilt in January, which is a fantastic new truck, an iconic truck. It’s doing really well in the market. So it’s just part of our continued rollout of new products. The new medium-duty products in North America are doing exceptionally well. We see the market share continuing to grow. End of last year, we’re at 14.5%, gone to 17% and medium duty with really strong margin performance. And then if I think more broadly about strategies of product introductions, we’re continuing to develop new trucks, new engines, new alternative energy capability so that we have a very capable powertrain portfolio to handle the emissions changes that are coming forward and the uncertainty, frankly that the industry will experience with regulations. So it feels like PACCAR is very well positioned to handle anything that comes forward at us.
Harrie Schippers: And if I may add there, Preston, that the 2027 emissions that we will see nationwide, what CARB [ph] is doing this year is already very similar in 2024. And we will launch a PACCAR engine in California that meets their requirements this year. So we’ll get – we’ll know exactly which technology to apply there.
Chad Dillard: Thank you.
Preston Feight: You bet. Have a good day.
Operator: Thank you. Our next question comes from David Raso from Evercore ISI. David, your lines are open. Please go ahead.
David Raso: Hi. Thank you for the time. I’m curious about Europe. The deliveries for the first half of the year, it looks like you’re planning to be down around 31% and the market guide, your midpoint is down 18%. You didn’t change the guide for the industry. Just wanted to get your thoughts on, is that level of delivery clearing out inventory? Or just trying to understand your considerations of lowering the European industry guide when you’re going through these numbers. Just trying to get a sense of how you view that market the rest of the year?
Preston Feight: Yes, I think I’ll start and Harrie can add whatever you’d like to. I would say that the European truck market has seen softening, and that’s especially true in Central and Eastern Europe, which are strong markets for DAF. So we’ve seen those delivery numbers adjust appropriately around that. And we have the build dialed into the delivery schedule. So we think that the new DAF truck continues to deliver for PACCAR great margin performance, which is a pretty important thing for us with this new product, it’s delivering great fuel economy for our customers. And so I think that you’re just seeing the cadence of the market down and we would expect to see that probably continue throughout the year. May be you’d add, Harrie?
Harrie Schippers: We’re also coming off a record quarter in last year. First quarter of 2023 was record quarter for DAF in Europe, and so a lot of that what Preston’s talking about the fuel economy benefits and the great performance of the new truck. So the comps are getting a little bit more difficult, too, there.
David Raso: Yes. I mean the comp does ease in the fourth quarter, too. I’m just trying to get a sense of should we expect deliveries to be that far below your industry outlook for most of the year in Europe. Again, I know the fourth quarter gets easier. And then…
Preston Feight: I wouldn’t read into it that way, David.
David Raso: [Indiscernible] Canada. Okay. Okay. And then, U.S., Canada…
Preston Feight: And yes, I wouldn’t try to read into it for the full year that way. Then I think the U.S., Canada, the delivery schedule seems really solid and stable for us right now. We’ve again, the thing I would want to remind is a 270,000 truck market at the midpoint, it’s a very nice market. And with PACCAR share increasing, that feels positive to us.
David Raso: Yes. I think we’re just trying to figure out if like U.S., Canada first half of the year, deliveries are up eight, but we’re looking for Class 8 as an industry to be down nine, medium is some offset, but we’re just trying to get a sense of like the second half of the year, how much does the U.S.-Canada build schedule come down? That’s sort of what we’re trying to...
Preston Feight: Well, I think what we shared is we’re filling the third quarter right now and so obviously you and everyone else is watching the second half of the year to see what happens, and I think it’s a little bit too much of a prognostication to guess what Q4 is going to be. But the math says it should be a good year. Our order intake looks like it should be a good year. The truck performance is good, the margin performance is good. So we feel like it all adds up to, like as far as the story can go, really positive outlook.
David Raso: Yes. At least the mix is favoring you with a vocational strength given your position in that market, so, okay, very helpful. Thank you.
Preston Feight: Yes, David, that’s another really good point you brought up. Thanks for bringing that up.
Operator: Thank you. Our next question comes from Jerry Revich from Goldman Sachs (NYSE:GS). Your line is now open. Please go ahead.
Unidentified Analyst: Hi, this is Clay on for Jerry. Our question here though, what has been the early feedback from customers on how they’re thinking about the higher cost profile of the next generation trucks and to what extent do they value the embedded extended warranty?
Preston Feight: Well, I think they’re obviously paying attention to what it’s going to be. Nobody knows what those new prices are going to be yet. There’s lots of speculation out there. It’s a bit early for the speculation I think. Other than to know the emission standards are going to be requiring additional after treatment changes to the engines and different capabilities on the engines to manage the after treatment. So with those, there’s going to be costs. And I think at any time throughout the years the customers pay attention closely to that. So I think as we already shared, they kind of feel like they’d like to get their orders in a steady way and also kind of avoid any kind of point of disruption around the introduction of the new emission cycle. So that’s what’s going to pull forward the 2025 and 2026 purchases, I think.
Unidentified Analyst: Thanks. And along the same lines as the installed base of those trucks, the 27 emission trucks grows, will your parts market share benefit from the expanded warranty provisions? Thanks.
Preston Feight: Yes, it will. Frankly, simply, yes, it will.
Operator: Thank you. Our next question comes from Jeff Kauffman of Vertical Research Partners. Jeff, your line is now open. Please go ahead.
Jeff Kauffman: Thank you very much and congratulations on a solid quarter. A lot of my questions have been asked. So I want to drill down on truck ASP. You mentioned that new truck pricing is up about 3%. But I’m calculating ASP to be closer to up. So I’m assuming the difference between the 3% and the 8% is mostly mix related. Can you help me bridge that gap and help me understand maybe how much of this could be more vocational in the U.S. versus over the road or versus, say, North American sales versus European sales, which is David Raso noted are down substantially. Just trying to understand the difference between the two numbers?
Preston Feight: Sure, Jeff. Hey, thanks for the opening comment also. You nailed it. I already think as you typically do is like if you look at the vocational markets, the truck prices are high there, and I would also say that the mix between North America to Europe is a contributing factor.
Jeff Kauffman: Okay. So as I think forward for the year, I would probably expect your average reported ASP to be up a little more than your price increases as a result of mix kind of carrying through 2024. Am I thinking about it wrong?
Harrie Schippers: That’s a logical assumption based on all those things, yes.
Jeff Kauffman: Okay. Well, again, congratulations and thank you.
Preston Feight: Yes. Thank you, Jeff.
Operator: Thank you. There are no other questions at this time. So I’ll hand back to the management team for any further remarks.
Ken Hastings: We’d like to thank everyone for joining the call, and thank you, operator.
Operator: Ladies and gentlemen, this concludes PACCAR’s earnings call. Thank you for participating. You may now disconnect.
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