PACCAR Inc.

Good morning and welcome to PACR's fourth quarter 2024 earnings conference call. All lines will be in 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, PACR's Director of Investor Relations. Mr. Hastings, please go ahead.

Good morning. We'd like to welcome those listening by phone and those on the webcast. My name is Ken Hastings, PACR's Director of Investor Relations. And joining me this morning are Preston Fite, Chief Executive Officer, Harry Skippers, President and Chief Financial Officer, and Bryce Poplosky, Vice President and Controller. As with prior conference calls, we 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 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 Fite.

Hey, good morning, everyone. Harry, Bryce, Ken, and I will update you on our fourth quarter full year 2024 results, as well as other business highlights. PACCAR's outstanding employees delivered strong results by providing our customers with the highest quality trucks and transportation solutions in the industry. In 2024, PACCAR achieved annual revenues of $33.7 billion, net income of $4.2 billion, and an after-tax return on revenues of 12.4%. This is the second highest profit in the company's history and was a great year for PACCAR. PACCAR's strong financial performance reflects the higher profitability of the latest generation of Kenworth, Peterbilt, and Doff trucks, record results in our parts division, and another good year for PACCAR Financial Services. PACCAR shareholders and customers benefited from the $8.6 billion invested over the past 10 years in new products, world-class facilities, and state-of-the-art technologies. PACCAR has achieved 86 consecutive years of net income and has paid a dividend every year since 1941. In 2024, PACCAR declared $4.17 per share in dividends, including a year-end dividend of $3 per share. This is a 53% payout of net income and a dividend yield of 4%. PACCAR's fourth quarter revenues were $7.9 billion and net income was $872 million. PACCAR parts achieved excellent fourth quarter revenues of $1.6 billion and pre-tax profits of $428 million. Last year's U.S. and Canadian Class A truck retail sales were 268,000 units. Kenworth and Peterbilt's market share increased to a strong 30.7%, up from 29.5% in the prior year. In the medium-duty market, Kenworth and Peterbilt's excellent new medium-duty truck has created customer value, and market share grew from 14.5% to 18% as they produced a record 21,500 medium-duty trucks. In 2025, the US economy is projected to expand by more than 2%. The vocational truck sector, where Peterbilt and Kenworth are the market leaders, is steady. The less than truckload market is performing well, while the truckload segment is beginning to show signs of improvement. The US and Canadian Class A truck market is forecast to be in a range of 250,000 to 280,000 vehicles. We anticipate a strengthening market as we progress through the year. European above 16-ton truck registrations were 316,000 last year. Customers appreciate DAF's industry-leading fuel efficiency and driver comfort. DAF trucks have a competitive advantage in the European market due to an innovative aerodynamic design and feature the largest and most luxurious cab interior. In 2025, the European economy is forecast to grow modestly We expect the above 16 ton truck market to be in the range of 270 to 300,000 registrations. Last year, the South American above 16 ton market was 119,000 vehicles and is expected to be similar this year. Thus, market share in the important Brazilian market was right around 10% and reflects a 23% production increase to more than 10,000 trucks in 2024. In addition to its successful growing business in Brazil, DOF trucks are now sold in Mexico and in the Andean region of South America. Packard truck parts and other gross margins were a solid 15.9% in the fourth quarter. These margins are considerably higher than in prior industry cycles, reflecting the increased value that the new Kenworth, Peterbilt, and DOF trucks provide to customers, as well as the continued growth of Packard parts. In the fourth quarter, PACCAR delivered 43,900 trucks. And in the first quarter of 2025, deliveries are forecast to be around 40,000. We estimate PACCAR's worldwide first quarter truck and parts gross margins to be similar to the fourth quarter and in a range of 15.5% to 16%. In addition to the strong financial performance, other business highlights in 2024 included PACCAR's progress on amplified cell technologies, our joint venture to manufacture commercial vehicle batteries in the United States. DOF was honored as the Fleet Truck of the Year in the UK. Packard Parts celebrated the 30th anniversary of TRP. Peterbilt earned the Environment and Energy Leader Award for Sustainability. And Kenworth celebrated the 50th anniversary of its world-class truck factory in Chillicothe, Ohio. We look forward to an excellent year in 2025. as we celebrate the 120th anniversary of PACCAR's founding in 1905. Harry Skippers will now provide an update on PACCAR Parts, PACCAR Financial Services, and other business highlights. Harry?

Thank you, Preston. In 2024, PACCAR Parts set new records for revenues and profits. Annual revenues increased by 4% to a record of $6.7 billion. and pre-tax profit increased to a record $1.71 billion. Parts' gross margins averaged 30.9%. In the current freight environment, we estimate parts sales to grow by 2% to 4% this year. Opeca Parts' excellent long-term growth reflects the benefits of investments that increase vehicle uptime and convenience for customers. Pekka's aftermarket parts business provides strong profitability through all phases of the business cycle. Pekka Parts has expanded to 20 parts distribution centers, or PDCs, worldwide, including a new PDC in Germany, which opened in November. This PDC enhances parts availability and delivery times to German dealers and customers and is part of a strategy to increase DAF's truck market share in the largest truck market in Europe. Pekka Financial Services achieved fourth quarter pre-tax income of $104 million. Annual pre-tax income was $436 million. Pekka Financial is performing well with a portfolio that has excellent credit quality and low past dues. Pekka Financial provides the highest quality service in the market and makes it easy for customers to do business with them through the efficient use of technology in the credit application and loan servicing processes. Becker Financial operates 13 used truck centers around the world to support the sale of premium Kenworth, Peterbilt, and Dove used trucks, and is adding a new used truck center in Warsaw, Poland this year. Last year, Becker invested $796 million in capital projects, and $453 million in research and development. Packard delivered an excellent return on invested capital of 25.5%. This year, we are planning capital investments in the range of $700 to $800 million and R&D expenses in the range of $460 to $500 million as we invest in key technology and innovation projects. These include new clean diesel, and alternative fuel engines, the next generation of battery electric powertrains, advanced driver assistance systems, and integrated connected vehicle services. Packard is expanding manufacturing capacity at our factories in Europe, North America, Brazil, and Australia. These investments will support Packard's future growth as well as our customers' success. Packard's independent Kenworth Peterbilt and Dove dealers consistently invest in their businesses, enhancing our industry-leading distribution network and making a significant contribution to PECA's long-term success. PECA looks forward to another excellent year in 2025. Thank you. We'd be pleased to answer your questions.

Thank you. If you'd like to ask a question, please press star followed by one on your telephone keypads. If you'd like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure you're unmuted locally. As a reminder, that's star followed by one on your telephone keypads now. Our first question comes from Tammy Zakaria of JP Morgan. Tammy, your line is open. Please go ahead.

Hey, good morning. Thank you so much for taking my question. So my first question is on the delivery guide. Can you help us understand how to think about deliveries by geography in the first quarter versus the fourth quarter, trying to bridge the gap and where that difference is coming from, which geography, if you could highlight?

Yeah, happy, Tammy. Good to talk to you. What I would share with you is in the U.S., we expect Class A to be flat or up even a little bit in Q1. But what we've seen is the medium-duty market, which has just been very robust, is probably normalizing now. So we'll see a bit smaller medium-duty market. I'd also remind people that there was a Euro 6 implementation in Mexico that was in the fourth quarter. So that kind of was – there was a bit of a pre-buy in Mexico that won't be present in the first quarter. And also, if you're doing comparisons of Q4, Q1 – And we had good supplier performance in the fourth quarter that allowed our normal year-end inventory reduction to take place. So all those things kind of had an impact. And maybe the only last one I'd add is we have fewer production days outside the U.S., specifically in South America, as an impact. So all that goes into that delivery guidance. But in essence, we're seeing flat Class 8, maybe slightly up Class 8 in the U.S. markets.

Got it. That is very helpful, Keller. Thank you. And my second question is, On the investments for Amplify, the JV you have with Cummins and Daimler, do you think you could revisit that, or the whole idea could be rethought at this point, given the current administration's shift away from BEVs?

Well, I'll share this with you. I am so happy with how that's going, and I think if I could remake the decision now, knowing what I know, I'd make the same decision. It's a long-term strategic objective for our company to be able to offer our customers the full portfolio of powertrain choices. We see that there will be places where battery electric vehicles make sense, or it could be hybrid vehicles. And our amplified cell technologies joint venture will allow us to have the lowest cost, highest quality batteries, so that we'll be the most competitive in the market, which will be in support of our customers.

Okay, great. Thank you.

You bet. Thank you. Our next question comes from Kyle Menjes of Citi. Kyle, your line is open. Please go ahead.

Thanks, guys. So you did reference the vocational strength, and it seems like that's been a big piece of why we've seen this order of resilience in Class 8. But I guess just what gives you confidence that dealers aren't overordering here to stay in bodybuilders' pipelines and just Could you maybe give us a gauge of how many of those orders actually have a customer's name attached? Thank you.

Yeah, we have all of our customers there feel really solid. In fact, one way to look at it is inventory. So the industry inventory is running, what, 3.1 months in heavy duty, and Kenworth and Peterbilt's inventory level is at 2.3 months. So our inventory is in good shape. There is a backlog at bodybuilders, but those are really spoken-for trucks.

Okay, thank you. And then if you could just provide maybe a little more color on how you're thinking about the medium duty market in U.S. and Canada as we progress through the year. You mentioned probably down a little bit in one queue, but I guess just how are you thinking about the growth as we move throughout the year, first half or second half would be helpful. Thank you.

Yeah, I think that what we saw kind of referencing back, Kyle, to last year, you'd say that we had a pretty steady set of builds in the year. They were strong builds. There was, if you recall, a mirror factory fire that amplified some deliveries in the third quarter. So when you're comparing 3Q to 4Q, you'd see lower deliveries in 4Q. And now we just think that the medium duty market is going to go back to more normal, historically normal levels. And in those normal levels, we'll continue to see our new products perform well. Customers seem quite happy with the new 2.1 meter wide Kenworth and Peterbolts. They work well with bodybuilders. They're gaining our market share. In fact, we've grown from 14.5% to 18% share in the medium duty market last year. So we feel good about our position. The cadence of half one to half two, probably would expect it also to see strengthening in the second half.

Thank you. Our next question comes from Stephen Volkman of Jefferies. Stephen, your line is open. Please proceed.

TAB, Mark McIntyre, Great good morning everybody, thank you for taking the call i'm curious as we sort of do the dumb math and look at total truck revenues divided by the deliveries. TAB, Mark McIntyre, It seems like the kind of revenue per truck was down 5% dish, which is one of the bigger declines we've seen recently and I know there's a lot in there between price and mix and things like that, but i'm curious. if you can provide any color. Was that mostly mix? Is there kind of more day cab happening or more vocational? Or how do we think about kind of what's going on in price mix?

Yes, Steve, there's a little bit of mix, regional mix going on. So North America has more vacation or holidays in the fourth quarter. It's a little bit stronger mix in Europe. And then on top of that, we had unfavorable foreign exchange rates. So it's a very strong dollar. And that probably accounts for half of the reduction in average sales price.

Got it. Okay. Right. A lot in there. Okay. And then slightly differently, have you guys announced or started telling your customers kind of the order of magnitude of the expected price increase for the 2027 regulations that we're all looking forward to?

You know, we're having general conversations with them about that, and we're still saying it can be the $10,000, $15,000 price range for adjustments to 2027. Obviously, the details of that aren't finalized, but that's kind of what it feels like right now.

Okay.

Thank you, guys. You bet.

Our next question comes from Rob Wertheimer of Milius Research. Rob, your line is open. Please go ahead.

Oh, thank you. I had two, if I may. First is just I'd love to hear your thoughts on gross margin trend and truck pricing. It seems like used markets have stabilized inventory, at least on sleepers, has come down. I don't know if you see that in probably better data that you have. And just curious whether you see any hopefulness or the reverse on new truck pricing. That's my first one.

Yeah, sure. Rob, what we'd say is that we're looking into Q1 and seeing like Things should be pretty steady, as you can tell from our guide, where we said 15.5% to 16% gross margin. So we see that things are starting to look up, but just beginning to, as we noticed, the truckload carriers starting to come back into the market and then probably gaining strength through the course of the year.

And then on the U-stroke side, Rob, I would add that Packer Financial's U-stroke inventory is at very healthy and low levels right now. So that's also a good thing.

That's a good leading indicator as well.

From the bottom there. Okay, perfect. And then Preston, just to spark my curiosity, you mentioned hybrid trucks. And I think across the auto and maybe even the truck world years ago, there was a bit of resistance to hybrids and a feeling that you'd go full electric. I'm curious what you're hearing from your customers. Is that something that there's actual demand for now? Are there really use cases that are non-regulatory? I'm just curious about your thoughts there, and I'll stop there. Thank you.

Yeah, great question, Rob. I think what we see is that through hybrid systems, we might be able to improve fuel efficiency and likewise greenhouse gas by double-digit levels. And if we're able to do that, that's obviously desirable for our customers. There is an added cost to it, so the balance of what's the payback time sits into there. So there is a striving for a business case which is free of regulatory hurdles, but we know that there will be regulations coming and going over time, so that could also be an added incentive to a hybrid business case. And that's true for both U.S. and Europe, maybe especially true in Europe.

Thank you. Our next question comes from Steven Fisher of UBS. Steven, your line is open. Please go ahead.

Thanks. Good afternoon. I just wanted to touch upon the margins in the first quarter. As you said, Preston, they're going to be pretty stable, which is pretty impressive on 10% lower productions. I guess I'm just curious, what is enabling that steadiness of the margins in light of that lower level of production?

Well, I think what we're seeing is, you know, the trucks are performing really, really well. So that's helpful to us, obviously, in terms of discussions with customers. Fuel economy is great. The reliability is great. Our warranty costs are slightly down. And it just feels like between all those factors and where the market is starting to head, we think that we'll see that kind of a margin appear in the first quarter.

Okay. And I guess just curious about the broader pricing environment now. Do you think that it's now kind of more stable that we're in this part of the downturn and how confident can we be that sort of we've hit the low point on margins and pricing discounts for the year?

Sure, great question again, and I think what we've shared and we continue to share is like we see 2025 with improvement coming throughout the year. We think for sure in the second half, maybe it's in the second quarter. We'll have to watch how the world develops, of course, but it feels like a positive trend.

Okay, thank you very much.

You bet.

Our next question comes from Angel Castillo of Morgan Stanley. Angel, your line is open. Please go ahead. Angel, we are receiving a lot of feedback from your line. We will just try and reopen your connection.

Charlie, why don't we go to the next caller?

Charlie, let's go to the next caller.

Our next question comes from Jamie Cook of Truist Securities. Jamie, your line is open. Please go ahead.

Hi, good morning. Just to clarify, can you speak specifically what price clause was for truck and for parts in the fourth quarter specifically? and what's implied by region for 2025. And then my second question, it sounds like you would say the first quarter is the trough for margins in total. Is that for total company or is that also for truck margins? And I'm just wondering if you get to the back half of the year, do you expect to see sales growth and then get back to a position where we're actually seeing incremental margins versus decremental? Thank you.

Yeah, I mean, that's another way of asking what we've already talked about, I think, quite a bit. But the truck for Q4 price versus cost was negative 0.6 on price and cost was 2.7%. And what we're expecting to see is some trending improvement through the course of the year, Jamie. And so we think that'll be favorable to your point. And we see continued strong parts margins. So like 30.9% in 4Q. and we would expect to see continued good margins in the first quarter as well. So those are contributing to a general upward trend in our mind.

But was that by geography, I guess my question was?

I don't think we provided by geography, Jamie.

Okay. And then I guess the follow-up question was, by the second half of 2025, should we start to see incremental margins? Are you assuming you know, sales volumes are up versus decrementals? I mean, your margins are pretty impressive right now in the first quarter.

As the market improves in the second half of the year, we would expect margins of development to improve accordingly.

Yeah, I mean, I think, Jamie, nice comment. Okay, thank you. Thanks also for the comment on the margins because it is, you know, these are cycle over cycle good margin improvements, a few hundred basis points. And we do think that, as we've said last time, we remain consistent this time. We think that 2025 will see improvement throughout the year. And as it improves, that'll be good for our incrementals.

Great. Thank you very much.

You bet.

Thank you. Our next question comes from Tim Athene of Raymond James. Tim, your line is open. Please go ahead. Thank you, good morning.

Maybe just first question, just in terms of any comments you could provide just as it pertains to order activity and how the backlog is filling in both North America and Europe. Just curious in terms of how far your lead times extend and how that presumably quoting into the second quarter, but maybe you just give some color on that.

TAB, Mark McIntyre, Sure, Tim good good question good insight to gain for everybody is, I think that we're roughly 75% or three quarter full and Q1 and probably more like half full and Q2 so that's kind of where things look like pretty reasonable levels.

TAB, Mark McIntyre, got it okay and the presumably that the composition of that backlog much more more weighted I would assume towards vocational. Should we think about any mix impact from that? Just if that supposition is correct, that would be a heavier weighting than normal. Is there much of an impact, again, from a product mix standpoint, or is that kind of a neutral dynamic there?

You know, Tim, I think that the vocational, the heavy influence of vocational was more of a last year thing. And as vocational study now, I think the mix shift is kind of coming back to more traditional levels.

Okay. Okay. Got it. And then maybe for, for Harry, just as if a big F, but if we had the dollar at today's levels through the quarter, uh, some pretty big moves against some of your, your key currencies, is there a way to think about a, what, what, um, FX had, what impact that foreign exchange had on, on margins in the fourth quarter and what, you know, what that may imply if, if the dollar were at today's levels for the first quarter?

Yeah, this is Bryce. I'll just comment on that. We had a negative effect on our net income in the fourth quarter from the foreign currencies, about $20 million. And something we will, obviously we don't know what's going to happen to rates, but as you said, if they stay where they are, obviously it would be a recurring effect.

And it's all factored into our guidance of between 15.5% to 16%. Okay.

Thank you very much.

Thank you. Our next question will go to Angel Castillo of Morgan Stanley. Angel, your line is open. Please go ahead.

Hi, can you hear me this time?

Yeah, you're not giving us quite the static you did on your first time.

I apologize for that. It sounds like it's working right now. Thanks for taking my question. I apologize if somebody asked it, but I think you lowered the R&D expense for the full year. Can you just talk about maybe what's driving that and Maybe going back to one of the initial questions around the amplified JV, obviously a lot of kind of good, I guess, strategic reasons to continue to invest in that, but I believe it was a multi-phase project. Is it fair to assume that you will be doing it in phases and deciding to move forward, or is it we should assume that all three phases are moving forward now?

Yeah, sure. That's a great question. Both of them. So R&D is going to be still year over year, we're thinking, you know, slightly up. So probably in the range of 5% up from last year, just because there's a lot of great projects for us to be working on. Of course, the Amplify one doesn't really fit into that space. But what we're doing with Amplify is we've cleared the ground now, we're putting in the buildings, and then what we'll do is measure how much capacity we need to install, but we want to get started on that so we have some capacity available for the markets that exist. And then we'll just scale capacity based upon market demands for the EVs or hybrids.

That's helpful. And then I wanted to go back to some comments we made this quarter and I guess last quarter as well in terms of maybe some green shoots on the TL or starting to see some improvements. I think you mentioned that you could maybe see some improvement as soon as 2Q. Can you just give us a little bit more color? What exactly are you hearing from your customers, you know, in terms of potential green shoots on the TL market? And maybe what would kind of give you confidence in that 2Q number starting to show a rebound versus maybe more of a second half?

Sure. A couple things. One is we've just started to see spot rates of improvement. So that's something that's measuring into our thoughts. I'd say some of the capacity has come out of the market, so it's making it easier for the good carriers to become successful. And then I would also add, as we said earlier, that the used market inventories are quite low, and so that's kind of a tell of how the world is starting to turn a little bit. So all of those are soft indicators of what we think is to come.

Very helpful. Thank you. You bet.

Thank you. As a reminder, if you'd like to ask a question, please dial star followed by one on your telephone keypads. Our next question comes from David Rasso of Evercore ISI. David, your line is open. Please proceed.

Hi. Thank you for the time. Your comment about strengthening market as the year progresses, how is that influencing how you're pricing the 26 model years that start shipping in April? And then wrapping with that maybe a bit, um, your reaction to some of the recent executive orders, uh, from the white house, just to think about how that influences how you think about the pre-buy, which I assume sort of dovetails a little bit and how you think about pricing.

Well, um, you know, we've, we look at the executive orders, we pay attention to it, but we know what the rules are today and we are ready for those rules. If they were to change, um, then we'd be ready for that too. One of the things we've been able to do is develop the suite of technologies we need. California has already implemented low-NOx engines, and Packer has a low-NOx engine in California, so we can be available to that. And if things shift around, we'll be ready in that position as well. To the first question you asked about pricing and 2026 product shipments, I think as the market moves around, and people are experiencing the great performance of the Kenworth, Peterbilt, and Doff trucks, we expect that we will see strengthening price position for ourselves as the course of the year progresses. But we think that trend carries on even beyond 25, we anticipate.

And we hear the model year 26 starts shipping in April. I know there'll be a little mix of 25s and 26s and 2Q. But is that accurate? Will we start getting some of the 26 model shipping in 2Q for this year?

Yeah, your comment, David, there, I don't know what that is, but that doesn't resonate to me of a model year 26 shifting in April for us. So I'm not sure how to answer that.

Okay. Well, we can talk offline, but basically the higher pricing sequentially is what you're referencing as the year goes on, however you want to name the model.

Yeah, that's fair.

But yeah. Yeah. Okay. Thank you very much. I appreciate it. You bet.

Thank you. Our next question comes from Jerry Revich of Goldman Sachs. Jerry, your line is open. Please go ahead.

Yes. Hi. Good morning and good afternoon, everyone. I want to ask on the per truck performance in terms of operating costs, can you talk about the cadence that you expect over the next couple of quarters? It sounds like based on the gross margin guidance for the first quarter, maybe we're seeing a decline in per truck I'm wondering, based on your contract structures, et cetera, can you just talk about the cadence over the next couple of quarters?

If you look at the cost per truck, Jerry, in 2024, we saw some more content on trucks, especially in Europe, where we, because of legal requirements, some more connected data and other features were added during the year. We expect those cost levels to be more or less stable as we enter the new year. but no specific special developments in 2025 as far as I can tell right now.

Okay. And separately, you know, on the topic of EPA 27, I appreciate the base cases. It's going to move forward, but, you know, obviously governments can make changes in the scenario if there's an adverse legal ruling or something along those lines. Can you talk about how the company would react to it? In that scenario, if we have different regulations for California and other states versus the rest of the U.S., how would you see that scenario playing out in your planning process?

One of the things that's great about PACCAR is the quality of the people in this company and our ability to be nimble and reactive is, I think, second to none. So I think if there are changes in regulations, there is nobody better at adjusting to those regulatory changes than the people at PACCAR. And so we'll make sure we have the right products in front of the customers that are going to give them the best operating condition for the regulatory environment.

Appreciate it. Thank you. You bet.

Our next question comes from Jeff Kaufman of Vertical Research Partners. Jeff, your line is open. Please go ahead.

Okay, thank you very much. Two questions. Number one, I want to come back to the change in revenue per truck was down about 4.9. I think you mentioned 0.6 of that was price. I'm assuming most of the rest of the difference is mix and currency. Could you give me an idea of how to think about that math?

Like we said, I think more or less half of the impact is currency. And there is another element there that in the fourth quarter, The U.S. and Canada have more holidays, so the mix was a little bit more heavily towards Europe and other markets outside the U.S., but average sales prices. And Turks are smaller, and average sales prices are lower.

Okay, thanks. And I just want to follow up on David Rasso's question. Obviously, you know, as the administration comes out with new rules, you zig, you zag, you comply. Where do you think, ignoring 27 in the EPA, but are there other rulings that have been discussed that would be risk worth thinking about in terms of its impact to PACCAR from the new administration?

You know, I don't think of them as risks as much as I think of them as opportunities. I think any time environments change, if you operate better than your competitors, then you'll find yourself in a winning position, and that's where we intend to be.

So, Preston, what would some of those opportunities be in your mind?

The fact that we produce local for local. We have factories in the U.S. where we produce the trucks for the U.S. Same in Mexico, Brazil. Europe makes us very well protected to things like tariffs, for example. So we feel we're in a really good spot there.

Okay. Thank you very much.

You bet.

Thank you. Our next question comes from Michael Feniger of Bank of America. Michael, your line is open. Please go ahead.

Yeah. Hi, everyone. Thanks for having me on. Just Packer has clearly gained a lot of share. I realize it's because of, you know, your great trucks and your products. Just I'm curious if we see other OEMs raising capacity, trying to go after your market share, pricing intensifies. I'm curious how you guys weigh the puts and takes there. Is PACCAR more likely to continue to kind of price for your premium trucks and look to hold that margin? Or is it every year your goal is to try to gain that level of market share? Is that not as linear? Is that more over a multi-cycle basis? Just kind of curious how you think about that because you guys have gained so much share and there is some other OEMs kind of raising capacity.

Yeah, the way we think about it is we try to, first off, make sure that we produce great trucks for our customers. And if we produce great trucks for our customers that are valuable to them, then they're willing to pay us for those trucks and share in that value equation. That's the most fundamental thing and the more valuable The more we can do that for them, the better it works for us. And you gave a nod to the people at Packard producing great trucks. I'd also share in that our dealers are really outstanding and do a good job of supporting our customers and going out there and showing them the benefits of our trucks. So it's really about great trucks that achieve benefits to our customer. That helps us maintain our premium position and allows us also to simultaneously gain market share.

Great. And just on parts, you know, the last three quarters, you know, your revenue is up 4%. I think the pre-tax profit has been slightly down year over year. Is there anything on the last that you would want to flag on 24? And I'm just curious, you know, as we kind of turn the page, you know, does pre-tax profit, does the parts profit kind of grow in line with sales as we kind of look at 2025? Just any moving pieces there would be helpful.

And in 2024, we saw parts sales increase by 4%. At the same time, we see that the market for after sales for parts was down 2% or 3%. So growing our parts sales in a smaller market at excellent margins, that's a really impressive performance by the entire Packer Parts team. And as we go into 2025, we expect parts to grow by 2% to 4% for the year. That'll be another strong year for Packer Parts.

Thank you.

Yeah, you bet.

Thank you. As a final reminder, if you'd like to ask a question on today's call, please dial star followed by one on your telephone keypads. Our next question comes from Scott Group of Wolf Research. Scott, your line is open. Please go ahead.

Hey, thanks. Good morning. Good afternoon. I just want to actually follow up on that last question. know if you think about last year you know the market's down and parts sales are up four percent and i guess this year's you think the market's flat to up but the parts growth slows so i help me understand why we're not seeing you know a pickup in in parts sales if if the market is improving well one of the things is

Harry indicated it's like the cadence of the parts market last year. And like the general market, it's going to be a tale of two halves probably for the total market. So what we're talking about right now is Q1 and excellent parts performance in Q1. And we would expect to see them grow through the course of the year.

It's strongly related to freight activity and the rest of the business. So it should also have that kind of cadence.

OK, that makes sense. I think you said 75% sold for the first quarter, half full for the second quarter. Do you have any sort of context? Is that sort of about right? Is that ahead of schedule, behind schedule? And then do you have any view if the order strength of late, has pre-buy activity started yet, or is that still all on the come?

Yeah, you know, we're in a fairly normal position for our backlogs. really kind of normal for this kind of a part of the cycle. And I would say that the discussions around what people are going to do for the second half of 25 and then in 26 are happening, but I wouldn't say there's really been any significant order intake in that area.

Thank you, guys. Appreciate it. Yeah, you bet.

Thank you. Our next question comes from Mats Liss of Kepler Chevrolet. Mats, your line is open. Please go ahead.

yeah hi thank you for taking my question i just had a question about the european market if you could give some flavor about well different countries there and also how you see the market progress throughout 25 i mean you have the guidance but if you could give some some flavor there please

Yeah, sure. Let me start, and then Harry can add in some thoughts to it. I mean, the general sense for us is the European economy is maybe going to experience slight growth, really slight potentially in Germany. What we saw last year is that the eastern, central eastern European markets were softer because of geopolitics, I would say. So that has some impact on the market overall. We'll see if that continues through this year. And that kind of leads to, I think, people in Europe feeling moderately okay about the markets. I don't know what you would add to that.

Overall markets in Europe last year was down 8%. And then we talk about Western Europe, maybe down 5%. But Central and Eastern Europe in the 20% range, especially countries like Poland, Lithuania, are more impacted. And Dove has a strong presence there. So it has a little bit bigger impact on Dove than it maybe has on some of our competitors. But looking into 2025, a market in the range that we guided, that's a good market in which Packer should do really well.

Okay, great. Thank you. And could you just add a comment there regarding your capacity utilization in Europe there with DAF?

Capacity utilization is good. We have capacity for when the market grows, we continue to make smart investments in the factories there. We have our factory in the U.K., factory in the Netherlands. And so we can produce the trucks we need to. We continue to make those factories more and more efficient.

And the backlog and the coverage there for the first and second quarter is about the same as the average that you mentioned for the whole group.

Yes, that's correct. Europe is more or less in line with what Preston just mentioned on the total group.

Okay, great. Thank you very much.

You're welcome. You bet. Have a good day.

Thank you. We have no further questions in the queue at this time, so I'll hand back over to the management team for any further or final remarks.

I'd like to thank everyone for joining the call, and thank you, Charlie.

Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.