Paccar’s Financials Show Trucking Demand Remained Solid to Close Out 2022

Supply chains continued to improve during the quarter, allowing Paccar to materially reduce the number of trucks waiting for components. Management noted that production build rates are at a much healthier pace today and are expected to improve further throughout 2023. This gives us confidence to forecast 6% sales growth in 2023 (up from 5% growth previously), despite the tough comparison with 2022, which displayed 25% year-on-year top-line growth. That said, we elected to temper our 2024 sales growth expectation from approximately 4% to 3%. This bakes in our view that truck markets will start to moderate a bit but will still be supported by solid backlogs. After making a few other minor tweaks to our cash flow model, our fair value estimate declined slightly to $103 per share, down from $105 previously.