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PACCAR, Inc. (PCAR)

by Zacks Equity Research

July 27, 2012 | Comments : 0 Recommended this article: (0)

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Despite being the third largest manufacturer of heavy-duty trucks in the world, PACCAR, Inc. (PCAR) faces tough competition in its principal markets: the U.S., Canada and Europe. Further, the company expects industry sales in the above-16-ton truck market in Europe will fall due to the ongoing uncertainty in Eurozone.

Although the company beat the Zacks Consensus Estimate by a penny in the second quarter of the year, it expects sluggish growth in the U.S. and economic weakness in Europe to continue to mar its earnings growth. Therefore, we have downgraded the recommendation on the shares of the company to Underperform from Neutral and set a target price of $35.00.

The current P/E, which is close to the lower end of the historical range, is at a 15% premium to the peer group for 2012. Our $35.00 target price, 10.5x our 2012 EPS estimate, reflects our downgraded recommendation.

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