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RBC Capital sees a lot to like about PACCAR (NASDAQ:PCAR). The company is asset-light and cash-generative, has plenty of cash for shareholders, and is a leader in the “hard-to-disrupt” truck OEM market. Meanwhile, the company’s ability to penetrate the vehicle after-market segment is contributing to higher margins for PACCAR.
But after appreciating 80% year-over-year, additional gains might be hard to achieve for the stock, prompting RBC to initiate coverage with a Sector Perform rating and $123 price target, nearly unchanged from Monday’s close.
RBC Capital takes a more skeptical view on margins in the core Trucks division as the combination of falling truck demand with outsize price increases that will remain "harder to push through" leaves risks skewed to the downside.
“In a year when demand is declining and consensus margins look stretched, PACCAR’s cyclical nature means that opportunities will arise once more, but for now we see limited upside,” RBC Capital analyst Nick Housden said in his research note on Tuesday.
As one of the top three players in the truck OEM market that controls 80% of the market, PACCAR (PCAR) enjoys a significant moat to any other potential rivals. Its Peterbilt and Kenworth brands have a combined market share of ~29% of the heavy-duty market. However, RBC expects to see a decline in truck demand in PACCAR’s (PCAR) core North American regions and Europe after a strong 2023.
Analysts are mixed on PACCAR (PCAR) with Seeking Alpha authors rating the stock, but Wall Street analysts giving PACCAR (PCAR) a HOLD rating. Seeking Alpha's Quant rating view PACCR (PCAR) as a Hold.