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Here's Why You Should Hold PACCAR (PCAR) Stock for Long Term
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PACCAR Inc. (PCAR - Free Report) has established itself as a prominent player in the trucking industry, boasting renowned brands such as Kenworth, Peterbilt and DAF. Strong demand for PACCAR’s top-tier vehicles and strategic expansion initiatives have been driving the company. Shares of the company have increased roughly 25% year over year as against the industry’s decline of 11.7%.
PACCAR’s diverse revenue streams have strengthened its market position. While the majority of its revenues stem from truck sales, the company also produces and sells a wide range of parts, including its proprietary MX engines. The aftermarket parts segment, characterized by high margins and less cyclicality, is witnessing continued growth. The increased adoption of PACCAR’s MX engines and high truck utilization rates, coupled with an aging fleet, positively impact the PACCAR Parts segment. The expansion of parts distribution centers, dealer locations and independent TRP stores, along with innovative e-commerce systems, augments the prospects of this segment.
Financially, PACCAR boasts a robust balance sheet, supported by impressive credit ratings —A+ from Standard & Poor's and A1 from Moody's. Additionally, PACCAR’s steadfast commitment to shareholder value is evident in its consistent dividend payments since 1941. Over the past five years, the company has increased its dividend 10 times.
The trucking giant is actively enhancing its manufacturing capabilities to support future growth with significant investments in facilities across North and South America and Europe. Also, investment in advanced technologies is a cornerstone of PACCAR’s growth strategy. The company’s development of hydrogen fuel-cell Kenworth T680E and battery-powered Peterbilt 579 trucks underscores its commitment to zero-emission commercial vehicles. PACCAR’s accelerated efforts toward electrification, connected vehicle services and advanced driver-assistance systems are poised to enhance its market prospects.
However, near-term challenges persist. Macroeconomic and geopolitical challenges, including elevated borrowing costs and uncertainty regarding the timing of Federal Reserve rate cuts, pose risks. The company expects a year-over-year decline in truck deliveries for the second quarter of 2024, with an estimated 48,000 units compared to 51,900 units in the same period of 2023. PACCAR also anticipates a decline in European registrations of above 16-tonne trucks this year amid economic woes. Lingering supply chain challenges continue to impact labor costs, logistics and manufacturing expenses, potentially weighing on margins.
Notably, the Zacks Consensus Estimate for 2024 revenues and EPS implies a year-over-year decline of 3% and 13%, respectively. However, the consensus mark for 2025 EPS and sales implies a year-over-year uptick of 6% each.
While investors should remain mindful of the potential challenges in the near term, including economic uncertainties and cyclical industry dynamics, PACCAR is a stock that you should hold for the long term owing to its strong market position, diversified revenue streams, robust financial health, commitment to advanced technologies and consistent dividend payments. The long-term expected EPS growth rate of the firm is 10%.
PCAR currently carries a Zacks Rank #3 (Hold) and has a VGM Score of A.
The consensus estimate for BLBD’s 2024 sales and earnings suggests year-over-year growth of 17.3% and 155.1%, respectively. The EPS estimates for 2024 and 2025 have improved by 63 cents and 69 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for GELYY’s 2024 sales suggests year-over-year growth of 36.6%. The EPS estimates for 2024 and 2025 have improved by 21 cents and 34 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for AXL’s 2024 sales and earnings suggests year-over-year growth of 3.1% and 544.4%, respectively. The consensus estimate for 2024 has moved up 5 cents in the past 60 days. The EPS estimate for 2025 has moved up 20 cents in the past 30 days.
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Here's Why You Should Hold PACCAR (PCAR) Stock for Long Term
PACCAR Inc. (PCAR - Free Report) has established itself as a prominent player in the trucking industry, boasting renowned brands such as Kenworth, Peterbilt and DAF. Strong demand for PACCAR’s top-tier vehicles and strategic expansion initiatives have been driving the company. Shares of the company have increased roughly 25% year over year as against the industry’s decline of 11.7%.
PACCAR’s diverse revenue streams have strengthened its market position. While the majority of its revenues stem from truck sales, the company also produces and sells a wide range of parts, including its proprietary MX engines. The aftermarket parts segment, characterized by high margins and less cyclicality, is witnessing continued growth. The increased adoption of PACCAR’s MX engines and high truck utilization rates, coupled with an aging fleet, positively impact the PACCAR Parts segment. The expansion of parts distribution centers, dealer locations and independent TRP stores, along with innovative e-commerce systems, augments the prospects of this segment.
Financially, PACCAR boasts a robust balance sheet, supported by impressive credit ratings —A+ from Standard & Poor's and A1 from Moody's. Additionally, PACCAR’s steadfast commitment to shareholder value is evident in its consistent dividend payments since 1941. Over the past five years, the company has increased its dividend 10 times.
The trucking giant is actively enhancing its manufacturing capabilities to support future growth with significant investments in facilities across North and South America and Europe. Also, investment in advanced technologies is a cornerstone of PACCAR’s growth strategy. The company’s development of hydrogen fuel-cell Kenworth T680E and battery-powered Peterbilt 579 trucks underscores its commitment to zero-emission commercial vehicles. PACCAR’s accelerated efforts toward electrification, connected vehicle services and advanced driver-assistance systems are poised to enhance its market prospects.
However, near-term challenges persist. Macroeconomic and geopolitical challenges, including elevated borrowing costs and uncertainty regarding the timing of Federal Reserve rate cuts, pose risks. The company expects a year-over-year decline in truck deliveries for the second quarter of 2024, with an estimated 48,000 units compared to 51,900 units in the same period of 2023. PACCAR also anticipates a decline in European registrations of above 16-tonne trucks this year amid economic woes. Lingering supply chain challenges continue to impact labor costs, logistics and manufacturing expenses, potentially weighing on margins.
Notably, the Zacks Consensus Estimate for 2024 revenues and EPS implies a year-over-year decline of 3% and 13%, respectively. However, the consensus mark for 2025 EPS and sales implies a year-over-year uptick of 6% each.
While investors should remain mindful of the potential challenges in the near term, including economic uncertainties and cyclical industry dynamics, PACCAR is a stock that you should hold for the long term owing to its strong market position, diversified revenue streams, robust financial health, commitment to advanced technologies and consistent dividend payments. The long-term expected EPS growth rate of the firm is 10%.
PCAR currently carries a Zacks Rank #3 (Hold) and has a VGM Score of A.
Key Picks
Some better-ranked stocks in the auto space are Blue Bird Corporation (BLBD - Free Report) , Geely Automobile Holdings Limited (GELYY - Free Report) and American Axle & Manufacturing Holdings, Inc. (AXL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for BLBD’s 2024 sales and earnings suggests year-over-year growth of 17.3% and 155.1%, respectively. The EPS estimates for 2024 and 2025 have improved by 63 cents and 69 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for GELYY’s 2024 sales suggests year-over-year growth of 36.6%. The EPS estimates for 2024 and 2025 have improved by 21 cents and 34 cents, respectively, in the past 60 days.
The Zacks Consensus Estimate for AXL’s 2024 sales and earnings suggests year-over-year growth of 3.1% and 544.4%, respectively. The consensus estimate for 2024 has moved up 5 cents in the past 60 days. The EPS estimate for 2025 has moved up 20 cents in the past 30 days.