On Wednesday, Citi analyst Kyle Menges revised the price target for PACCAR (NASDAQ:PCAR) shares, reducing it to $112 from the previous $115 while maintaining a Neutral rating on the stock. The adjustment in the price target comes after an evaluation of PACCAR's fourth-quarter results and future earnings projections. The $56.23 billion market cap company currently trades at a P/E ratio of 13.9x, with InvestingPro analysis showing strong financial health metrics and a 55-year track record of consistent dividend payments.
Menges updated his model to account for PACCAR's reported figures, leading to a decrease in the adjusted earnings per share (EPS) estimate for 2025 to $7.50, down from $7.75. The forecast for 2026 was also lowered to $8.70 from $9.10, and the 2027 adjusted EPS prediction was adjusted to $7.60 from $8.10. These revisions were attributed to lower than expected Truck margins and deliveries, which were somewhat balanced by an increase in Parts margins. Despite these adjustments, InvestingPro data reveals the company maintains healthy financials with a current ratio of 5.34x and moderate debt levels, suggesting strong operational stability.
PACCAR anticipates a sequential decline in both Truck deliveries and margins for the first quarter. However, the company expressed confidence in a recovery during the second half of the year, potentially starting as early as the second quarter. Menges noted that while PACCAR might experience the lowest margins and deliveries in the first quarter of 2025, the management's and investors' expectations for a rebound in the second half set a challenging performance target for PACCAR shares within the year.
Additionally, the anticipated cost increase per truck for Model Year 27 (MY27) appears to be less significant than previously thought. There is also a possibility that the Environmental Protection Agency's (EPA) requirements for 2027 could be rolled back. In light of these factors, Menges suggests that there is a higher risk of negative impacts on the pre-buy ahead of the EPA 2027 regulations, reinforcing the rationale to maintain the Neutral stance on PACCAR shares. For deeper insights into PACCAR's regulatory compliance strategies and comprehensive financial analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top US stocks.
In other recent news, PACCAR Inc. reported fourth-quarter earnings that missed analyst expectations. The machinery giant reported adjusted earnings per share of $1.66, falling short of Citi's projection of $1.75 and the consensus estimate of $1.69. This was followed by the company's revenue, which also did not meet expectations, coming in approximately 5% below what analysts had forecasted. According to Citi analyst Kyle Menges, this was primarily due to truck deliveries totaling 43.9 thousand, slightly below the estimated 44.6 thousand. Despite these developments, PACCAR maintains robust financial health with a strong current ratio of 5.34 and has impressively maintained dividend payments for 55 consecutive years.
Raymond (NSE:RYMD) James analyst Tim Thein also maintained a Market Perform rating on PACCAR's stock, noting that the company's total gross margins reached 15.9%, which was slightly better than expected. Thein anticipates a modest sequential improvement in first-quarter deliveries and a gross margin between 16% and 16.5% for the upcoming quarter.
These are among the recent developments for PACCAR, as it navigates through its financial and operational aspects.
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