Trucking company PACCAR (NASDAQ: PCAR) fell short of the markets revenue expectations in Q4 CY2025, with sales falling 20.9% year on year to $6.25 billion. Its GAAP profit of $1.06 per share was in line with analysts’ consensus estimates.

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Company Overview

Founded more than a century ago, PACCAR (NASDAQ: PCAR) designs and manufactures commercial trucks of various weights and sizes for the commercial trucking industry.

Revenue Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last five years, PACCAR grew its sales at a decent 8.3% compounded annual growth rate. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. PACCAR’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 10.9% over the last two years. PACCAR isn’t alone in its struggles as the Heavy Transportation Equipment industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

This quarter, PACCAR missed Wall Street’s estimates and reported a rather uninspiring 20.9% year-on-year revenue decline, generating $6.25 billion of revenue.

Looking ahead, sell-side analysts expect revenue to grow 3.3% over the next 12 months. While this projection implies its newer products and services will spur better top-line performance, it is still below the sector average.

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Operating Margin

Operating margin is a key measure of profitability. Think of it as net income - the bottom line - excluding the impact of taxes and interest on debt, which are less connected to business fundamentals.

PACCAR’s operating margin might fluctuated slightly over the last 12 months but has remained more or less the same, averaging 11.6% over the last five years. This profitability was solid for an industrials business and shows it’s an efficient company that manages its expenses well. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it’s a show of well-managed operations if they’re high when gross margins are low.

Analyzing the trend in its profitability, PACCAR’s operating margin might fluctuated slightly but has generally stayed the same over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability.

This quarter, PACCAR generated an operating margin profit margin of 7.8%, down 3.6 percentage points year on year. Since PACCAR’s gross margin decreased more than its operating margin, we can assume its recent inefficiencies were driven more by weaker leverage on its cost of sales rather than increased marketing, R&D, and administrative overhead expenses.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

PACCAR’s EPS grew at a remarkable 12.7% compounded annual growth rate over the last five years, higher than its 8.3% annualized revenue growth. However, we take this with a grain of salt because its operating margin didn’t improve and it didn’t repurchase its shares, meaning the delta came from reduced interest expenses or taxes.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

PACCAR’s two-year annual EPS declines of 28.2% were bad and lower than its two-year revenue losses.

We can take a deeper look into PACCAR’s earnings to better understand the drivers of its performance. PACCAR’s operating margin has declined over the last two years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q4, PACCAR reported EPS of $1.06, down from $1.66 in the same quarter last year. This print was close to analysts’ estimates. Over the next 12 months, Wall Street expects PACCAR’s full-year EPS of $4.51 to grow 17.7%.

Key Takeaways from PACCAR’s Q4 Results

We struggled to find many positives in these results. Its revenue missed and its operating margin fell year on year. Overall, this quarter could have been better. The stock traded down 3% to $118.50 immediately after reporting.

PACCAR didn’t show it’s best hand this quarter, but does that create an opportunity to buy the stock right now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here (it’s free).