Under the Spotlight
PACCAR (PCAR)
As the manufacturer of Kenworth, Peterbilt and DAF trucks, PACCAR operates in an industry closely tied to freight transportation. Ahead of its October 27 quarterly results, attention is focused on fleet replacement, demand trends and the company’s ability to maintain profitability.
Its latest available results, for the second quarter of 2026, showed modest improvement compared with the previous year:
- Revenue of US$7.55 billion, compared with US$7.51 billion.
- Net income of US$752 million, up 3.9%.
- Earnings per share of US$1.43, compared with US$1.37.
- Global deliveries of 38,700 trucks.
Its business extends beyond vehicle manufacturing. Replacement parts and financial services also contribute to earnings and can help cushion industrial cycles. PACCAR Parts reported record quarterly revenue of US$1.75 billion and pretax income of US$417 million. Maintaining vehicles already on the road is therefore an important component of its operations.
In its latest earnings release, management highlighted aging fleets and improving freight rates as factors that could support new truck purchases. It projected a 2026 Class 8 heavy truck market of 230,000 to 270,000 vehicles in the United States and Canada.
From a valuation perspective, the October 22 closing price of US$109.59 represents approximately 18.4 times the adjusted earnings per share of US$5.94 expected for 2026, based on the consensus compiled by S&P Global. These estimates may change following the results.
The main risk remains the industry’s sensitivity to economic conditions. Weaker freight activity can delay fleet replacement. Changes in emissions regulations can also influence the timing of purchases.
We purchased PACCAR shares this week following the stock’s pullback. Its quarterly results, scheduled for October 27, will help assess whether the improvement seen in the second quarter is continuing and whether parts and financial services continue to support earnings.
Our investment approach combines quantitative analysis and advanced technologies to inform our decisions.
Theme of the Week
Oil brings inflation risks back into focus
Oil was a central market issue this week. Fresh Houthi attacks targeting Saudi energy infrastructure heightened concerns about disruptions to Middle Eastern supplies. These developments highlight how prices can respond to the risk of an interruption before production losses are confirmed.
On Thursday, Brent rose 4% to US$113.17 a barrel, its highest closing price since May 4. WTI gained 2.4% to US$99.47.
U.S. data released Wednesday also showed commercial crude inventories declining by 3.1 million barrels to 412.5 million barrels, approximately 3% below their five-year average.
For businesses, higher energy prices can increase transportation and production expenses, squeezing margins when those costs cannot be passed on to customers. For households, they leave less money available for other purchases. Central banks must therefore assess the effects on both inflation and demand.
These issues echo our September analysis of oil, inflation and interest rates.
Canada’s September inflation report, released Monday, illustrated that distinction. Annual inflation increased to 3.1% from 3.0% in August, mainly because of gasoline. Excluding gasoline, price growth slowed to 2.2% from 2.4%. The increase in headline inflation therefore did not reflect a uniform strengthening of price pressures.
Economic activity also showed signs of resilience. Canadian retail sales increased 1.2% in August, including after adjusting for prices, according to Friday’s release. In the United States, initial unemployment claims declined to 194,000. These indicators provided a counterweight to concerns about higher energy costs.
On the earnings front, investors continued to scrutinize artificial intelligence spending. Meta reported revenue growth of 26% to US$64.6 billion. However, capital expenditures of US$34.9 billion contributed to negative free cash flow of US$2.1 billion, meaning cash generated by operations did not cover those investments.
At Tesla, revenue was almost unchanged at US$28.0 billion, while operating income declined 56% and the operating margin fell to 2.6% from 5.8%.
Other reports offered a more favourable picture. GE Aerospace announced a 49% increase in orders and raised its annual outlook. IBM reported revenue growth of 5%, supported in part by software. The week highlighted differing corporate trajectories in an environment where costs and profitability remain critical.
Market Summary
The divergence between major indexes was particularly pronounced on Thursday. The Nasdaq Composite fell 2.60%, while the Dow Jones finished almost unchanged. Yet a majority of S&P 500 stocks advanced, illustrating the influence of large technology companies on the indexes. By Friday morning, the Dow remained higher than the previous Friday’s close, while the S&P 500, Nasdaq and Canadian market were lower. Oil was substantially higher for the week. The Canadian dollar strengthened against the U.S. dollar, while the U.S. 10-year Treasury yield remained below its level at the previous Friday’s close.
Markets by the Numbers
Weekly changes as of October 23, 2026
Friday morning intraday figures, measured from the October 16 close.
Oil changes use December 2026 futures contracts. The Canadian dollar is measured in U.S. dollars per Canadian dollar.
Stocks in Brief
Meta Platforms (META): -6.98% Thursday
Shares declined following the results. Meta now expects annual capital expenditures of US$135 billion to US$145 billion, compared with its previous range of US$130 billion to US$145 billion. The financing requirements associated with artificial intelligence remain a key focus.
Tesla (TSLA): -3.08% Thursday
Tesla generated US$1.5 billion in quarterly free cash flow. During its earnings presentation, the company also reduced its annual capital expenditure estimate to US$20 billion from US$25 billion.
Netflix (NFLX): -5.31% Wednesday
Revenue increased approximately 12% to US$12.9 billion, and the operating margin reached 34.6%. However, Netflix lowered its annual advertising revenue expectations to approximately US$2.7 billion from about US$3 billion because of the slower rollout of certain advertising features.
Procter & Gamble (PG): +5.58% Thursday
Sales increased 4% to US$23.3 billion. Organic sales growth, which excludes factors such as currency movements and acquisitions, also reached 4%. Adjusted earnings per share increased 1%, and the company maintained its main annual forecasts.
American Express (AXP): -1.99% Friday morning, intraday
Quarterly revenue increased 9% to US$20.1 billion. Adjusted earnings per share rose 13% to US$4.68. American Express raised its annual adjusted earnings forecast to a range of US$17.60 to US$17.90 per share.
Looking Ahead to Next Week
Central banks and technology leaders take centre stage
Wednesday, October 28 will bring several important events: the Bank of Canada’s interest rate decision and Monetary Policy Report, along with the U.S. Federal Reserve’s rate decision.
In Canada, TD and RBC expect the policy rate to remain at 2.25%. The risk of more persistent inflation nevertheless remains central to the discussion. In the United States, 94 of the 100 economists surveyed by Reuters expect the federal funds target range to remain at 3.75% to 4.00%. All respondents nevertheless anticipate an increase in December. Central bank commentary on inflation, energy and economic activity will therefore be closely watched.
On the corporate calendar, PACCAR will release quarterly results on Tuesday, October 27. Microsoft and Alphabet will follow on Wednesday, October 28, with Amazon reporting on Thursday, October 29. Following this week’s market moves, their comments on cloud services demand, artificial intelligence investment and profitability prospects will be particularly important.
To discuss your portfolio and financial goals, contact your Pratte team.
