Analyst Note| Dawit Woldemariam |
Narrow-moat Paccar reported solid fourth-quarter results to end 2021. We raised our fair value estimate to $101 from $98 to reflect our more positive view on Paccar’s ability to weather the challenging supply chain environment and rising inflation. In addition, our fair value increase accounts for Morningstar’s updated assumption that a rise in the U.S. corporate tax rate will not occur. Longer-term, we expect Paccar’s tax rate to be approximately 22%. We also raised our sales expectations for Paccar’s parts business. In 2022, we believe the segment can grow sales by 10% year over year, largely due to strong demand for existing trucks.