Paccar Earnings: Strong Results Lead Us to Raise Our Fair Value Estimate to $73

We raised our fair value estimate to $73 per share from $69 following Paccar’s PCAR strong first-quarter earnings. Management called out strong demand for its premium trucks and solid freight markets as key factors. This backdrop led Paccar to post $8 billion in truck and parts sales during the quarter (up 32% year on year). Truck sales showed the strongest gains (up 36%), as customers have increasingly turned toward Paccar’s premium brands, Peterbilt, Kenworth, and DAF. Paccar’s trucks offer customers better fuel efficiency, which is a key cost-savings lever. The company’s parts business also continued to show strength (up 17%). Recall, fleet ages continue to run at high levels, which has resulted in strong demand for Paccar’s aftermarket parts.

The company’s strong results led us to raise our 2023 sales expectations. We now think Paccar can post top-line growth of 11% (up from 6% previously) compared with 2022. Our increased confidence is due to the resilience of freight markets. In recent quarters, the demand story has been focused on freight markets softening from the high levels of 2021 and 2022. Elevated fleet ages have supported near-term demand. This point is a key reason why Paccar has seen strong parts sales in the last year. On the new truck side, fleet owners have been pushed to replace their older trucks. We see little signs of this dynamic letting up in 2023. Management even slightly raised its 2023 new truck volume forecast for the U.S. and Canada by 10,000 units on both the low end and high end. The company’s forecast range now stands at 280,000-320,000 new trucks for 2023.