Despite some challenges, Paccar stock looks cheap.
Paccar (PCAR -11.05%) stock tumbled 8.5% through 11:25 a.m. ET Tuesday after the company reported a tiny earnings miss.
Heading into earnings, analysts forecast the commercial truck manufacturer would earn $2.14 per share on $8.3 billion in sales. In fact, Paccar beat the sales figure easily with $8.8 billion in revenue reported. It fell a penny short on earnings, however: $2.13 per share.
Paccar Q2 earnings
Paccar CEO Preston Feight characterized both sales and earnings as “excellent” in Q2. This despite only one of the two metrics outperforming — and despite earnings declining 8.6% year over year. (Sales fell 1% year over year.)Â
Feight points out that year to date, Paccar’s earnings are up a strong 18% at $4.40 per share earned so far. Considering that first-half sales are up only 1%, that’s an impressive performance — albeit it was a whole lot more impressive in Q1 than in Q2.
Paccar also noted that its market share in Class 8 big trucks expanded significantly, to about 31.5% in Q2.
Is Paccar stock a buy?
Paccar did not give earnings guidance for either Q3 or for the rest of the year. Management did note that it sees the size of the Class 8 truck market in the U.S. and Canada shrinking this year, however, falling from about 305,000 trucks in 2023 to roughly 260,000 trucks in 2024 — a 15% decline.
This explains why Paccar has been able to grow its market share even as its sales shrink: It’s winning a larger piece of a shrinking pie. But is that a reason to avoid Paccar?
I don’t think so. In fact, at a valuation of about 11.4 times trailing earnings and paying a generous 4% dividend yield, I actually think Paccar stock looks kind of cheap right now. Admittedly, it may take some time for sales growth to bounce back. But if you’re patient, today’s sell-off could turn out to be a nice buying opportunity in Paccar stock.