Mark Smith: So, I heard you we will explicitly address incremental margins in May. You will not miss that for all who are asking very appropriate center of mind or top of mind for us clearly. So, you will hear that very, very shortly, I guess.
Jennifer Rumsey: Yes. And Jamie, good to have you back. We’re, of course, working and you’re seeing the improvement in the Meritor business as we do the integration and Accelera as we ramp up. Revenue, we’ll talk more about that. In terms of color on the market, we’re seeing continued solid demand in the heavy-duty market because of the high backlogs that have been built up, still a lot of strength in the vocational market. Truckload has been down for some time. And so we are still anticipating and hearing from our OEM customers that second half will have some weakening, and that’s baked into our revised guidance, which is down, but not as far down as previous guidance. Power Gen, I noted earlier, we’ve sold out the 95-liter through 2025.
We’re looking at capacity there and how we can take that up as well as with the new CentumTM launch, being able to sell some of our other engines into that market as well. So, pretty — really strong feeling very good about Power Gen, feeling good about medium-duty and vocational on-highway. It’s really the — it’s the truckload fleet customers in the heavy-duty market. That’s the one that we’re watching closely and still anticipating that it’s going to soften before we enter the next uptick in their cycle.
Mark Smith: Yes. And then what you heard maybe earlier was some industry consensus building about 2025 and 2026 ahead of 2027. So, our baseline assumption today is that this is not as sharp or as steep as normal cyclical downturn. That’s an assumption, not a fact, but that’s what we’ve baked into our outlook for this year. China is the one where we’re still — we’re waiting for more momentum probably.
Operator: Thank you. Our next question comes from the line of Jeff Kauffman with Vertical Research. Please proceed with your question.
Jeff Kauffman: Thank you very much and thanks for squeezing me in. I was just curious your thoughts. It’s apparent that the downturn, I think a lot of us feared in 2024 on the heavy-duty engine side isn’t going to be as bad as originally feared. I know ACT Research has taken up their forecast. You did mention some weakness beginning in 3Q, but are we taking from what would have been otherwise prebuy in 2026 if we have a better 2024? Or do you think the two are unrelated?
Jennifer Rumsey: I’m not sure that they’re related. I mean, we’re really watching what’s going on with production rates with backlog with some of the spot rate dynamics in the market. And if you look at some of the freight carriers out there, they’ve been challenged now for the last 18 months. And so that’s what’s driving our outlook, but fair. I mean we — because of the — it’s really the supply chain dynamic that has made this cycle so different and even unpredictable. It certainly held up better and longer than we had forecast, and we are still expecting to see some softening in the second half.
Jeff Kauffman: Okay. Well, congratulations, and that’s my one. Thank you.
Chris Clulow: Thanks, Jeff.
Operator: Our last question comes from the line of Chad Dillard with Bernstein Research. Please proceed with your question.
Unidentified Analyst : Hi. Good morning. This is Federico filling in for Chad. I would like to double click on the R&D intensity and how to think about this on the medium-term basis?
Chris Clulow: Sorry, can you repeat that? I don’t think we got the first part.
Unidentified Analyst : Sorry. We would like to double-click on the R&D intensity and how to think about this on a medium term basis.
Jennifer Rumsey: Yes. So we are — as you know, we’ve taken up our R&D investments. We noted that in our comments because we’re making investments, in particular in these new fuel-agnostic engine platform. So we’re at an elevated level of R&D for those new platform investments. And those products are beginning to launch and really will launch through the 2026 and 2027 time period. And then, of course, we’re at a period of investment in the Accelera business as we work to launch new products and ramp up revenue there as well.
Unidentified Analyst : Thank you.
Chris Clulow: Thanks.
Operator: Thank you. I’d like to turn the floor back over to Chris Clulow for closing comments.
Chris Clulow: Thanks, everybody, for your participation today. That concludes our teleconference. Really appreciate the interest. And as always, the Investor Relations team will be available for questions after the call. Have a good day.
Jennifer Rumsey: Look forward to seeing many of you in person in a couple of weeks.
Operator: This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
