Paccar Inc. (PCAR is benefiting from rising prices and increasing market share, along with strong growth in Mexico and Australia. However, a strong Class 8 market downturn in the U.S leads us to rate the stock a Hold, with a target of $55.00.
The company's base business in the U.S. and Europe is improving, aside from cyclical effects. In 2008, sales are expected to be in the range of 210,000 to 240,000 units. The company expects 2008 industry sales in Europe to be at a record of 340,000 to 360,000 units.
Over 60% of Paccar's revenues and profits are generated outside the US. The fastest growing businesses of the company are After-market Parts and Financial Services. With PacLease in Europe, the company expects to see continued Financial Services growth. On the other hand, Paccar has a leading share in both Mexico and Australia, both of which are seeing a surge in demand ahead of 2008 emissions deadlines.
|However, the company cut down its retail sales forecast as it expects the economic slowdown to continue through the first half of the year. A decline in the company's commercial truck unit sales and an increase in residual value risk are factors that may negatively affect the company's financial services operations. The financial services segment is subject to credit risk.
On July 22, Paccar reported Q2 08 earnings. Earnings per diluted share were $0.86, compared to $0.79 last year. Fourth quarter net sales and financial services revenue were $4.11 billion, up from $3.72 billion in the comparable quarter last year.
Read the full analyst report on PCAR
Get real-time market insights and profitable stock recommendations from the team of analysts at Zacks Equity Research. See all todays Analyst Blog entries on Zacks.com.