Newsletter Login

Username:

Password:


Need help logging in?

New Subscriber?
Start Here!

Stock Spotlight

Paccar's rig gig still in high gear

Recent Price
$66
Dividend
$1.12
Yield
1.7%
P/E Ratio
14
Shares (millions)
354
Long-Term Debt as % of Capital
52%
52-Week Price Range
$79.69 - $60.36

Paccar ($66; PCAR), a heavy-duty truck builder, is generating excellent operating momentum, with growth exceeding 20% for earnings per share, revenue, operating cash flow, and free cash flow over the 12 months ended March. But the shares fell despite a strong March-quarter report, underscoring the biggest question facing a cyclical stock like Paccar: How much longer will the good times last?

We have likely entered the late stages of the economic expansion, which merits some caution. But Paccar’s growth story still appears to be intact. It also exhibits a rare blend of robust operating growth, rising analyst estimates, and low valuation — it’s one of nine stocks in the S&P 1500 Index to score above 85 for Momentum, Value, and Earnings Estimates in Quadrix®. Paccar, earning an Overall score of 96, is a Long-Term Buy.

Business breakdown

Paccar’s origins date back to 1905 as a producer of railway and logging equipment near Seattle. It moved into heavy-duty trucks in 1945 and today builds trucks under the Kenworth, Peterbilt, and DAF brands (76% of 2017 sales, 60% of operating profit). It also supplies aftermarket parts (17%, 28%) and financial services (7%, 12%) to its customers.

Its share of the U.S. and Canada market for heavy-duty trucks has climbed to 31%, up from 27% in 2015, while its slice of the medium-duty market has held flat at 17%. In Europe, Paccar holds a 15% share for large trucks and 10.5% for midsized trucks.

Last year Paccar rebounded from a weak 2016, hurt by lower truck deliveries and weaker aftermarket demand for parts. That momentum is carrying over into 2018. Growth accelerated in the March quarter for the truck (sales up 39%, operating profit up 71%) and parts (19%, 27%) units.

With the U.S. truck market unlikely to have yet reached a peak, management sees no signs of demand slackening. Utilization rates for commercial trucks are running high, forcing customers to expand their fleets. Paccar entered 2018 with a backlog of $6.4 billion, up 33% from a year earlier and representing about 33% of annual sales. And cancellation rates remain low. “Our assessment is that as long as the economy is good that the truck markets will be good,” said CEO Ronald Armstrong.

In April, Paccar raised its 2018 guidance for the commercial-truck industry’s retail sales, now projecting 21% to 30% growth in the U.S. and Canada. For Europe, it now forecasts something between a 2% decline and 5% growth. Even the high ends of these estimates remain below peaks reached in the last upswing before the 2008 recession.

Conclusion

Plenty of skepticism already appears baked into the stock price. Shares trade at 13 times trailing earnings, a 24% discount to their five-year median of 17 and 31% below the median for construction equipment and heavy-trucks stocks. On May 1, Paccar raised its quarterly dividend 12% to $0.28 per share, payable June 5. It also pays a special dividend in the December quarter that varies by year.

An annual report for Paccar Inc. is available at 777 106th Ave. N.E., Bellevue, WA 98004; (425) 468-7400; www.paccar.com.

 

Paccar

 
Quarter
Per-Share Earnings
Sales Change
Quarterly Price Range
P/E Ratio Range
Mar '18
1.45
vs.
0.88
33%
$79.69
-
$65.31
19 - 15
Dec '17
1.18
vs.
0.82
34%
75.68
-
64.95
19 - 17
Sep '17
1.14
vs.
0.98
19%
70.32
-
61.93
19 - 17
Jun '17
1.06
vs.
1.06
7%
69.61
-
62.01
19 - 17

 
Year (Dec.)
Sales (Bil.)
Per-Share Earnings*
Per-Share Dividend
52-Week Price Range
P/E Ratio Range
2017
$19.46
4.26
$2.19
$75.68
-
$61.93
18 - 15
2016
17.03
3.85
1.56
68.50
-
43.46
18 - 11
2015
19.12
4.51
2.32
68.87
-
45.04
15 - 10
2014
19.00
3.82
1.86
71.15
-
53.59
19 - 14

 
Quadrix Scores†
Overall
Momentum
Value
Quality
Financial Strength
Earnings Estimates
Performance
96
90
89
74
62
91
24

* Earnings exclude special items.
NA Not Available.
† Quadrix® scores are percentile ranks, with 100 the best.
e Dividend and yield estimated.

More Investment Newsletters and Services

Drip Investor

DRIP Investor — how you can buy dividend-paying stocks without a broker.

Visit us at DRIP Investor, your source for dividend reinvestment plans.

Lazy Investor

The Lazy Investor — free weekly e-letter that delivers market updates and stock market information via email.

Visit us at The Lazy Investor, our free investment newsletter.

Horizon Investment

Horizon — registered investment advisor seeks to provide investors at all stages the ability to build, preserve and enjoy wealth.

Visit us at Horizon Investment Services to get started in an investment program that's right for you.

Upside

Upside — discovers today's small and midcap stocks poised to be tomorrow's Blue Chip leaders.

Visit us at Upside, your guide to the best buys in small and midcap stocks.

Current Hotline

Wednesday, May 23, 2018

The Dow Industrials and Dow Transports have climbed roughly 6% from their recent lows

Read More from the Hotline

Stock Spotlight

Paccar's rig gig still in high gear

Wednesday, May 23, 2018

Paccar ($66; PCAR), a heavy-duty truck builder, is generating excellent operating momentum, with growth exceeding 20% for earnings per share, revenue, operating cash flow, and free cash flow over...

Read More from Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com