Paccar Is A Truck Manufacturer Building A Reputation Of Looking Out For Shareholders

CLSA initiated PACCAR Inc PCAR with an Outperform rating and $65 price target. The firm believes the fundamentals of a deteriorating North American truck market are already discounted by the markets.

Additionally, analyst Kristine Kubacki believes the North American truck market is approaching a trough. She noted that the company had taken the fundamental weakness head on by cutting production and inventories earlier in the downturn.

Shareholder's Delight

CLSA noted that the company has been tweaking its balance sheet around through special dividends, thereby maintaining its focus on income. Along with the current annual dividend of $0.96 per share, the inclusion of the fourth quarter special dividend of $1.40 gives a last 12-month dividend yield of about 3.9 percent.

Conservative Estimates

The firm believes the consensus EPS forecast of $3.99 for 2016 could be conservative, as after-market revenue and margins are expected to be slightly better. Meanwhile, the company's estimates call for second half performance to be stable with that of the second quarter.

High Quality

CLSA is of the view that investors are looking past the cyclical bottom and are gravitating towards PACCAR due to its high quality and its strong history of returning cash to shareholders. While noting that it's below the consensus estimate of $3.66 for 2017 due to weak North American and European revenues, CLSA said investors are looking through the trough earnings to a recovery in North America in 2018.

At time of writing, PACCAR shares were up 2.26 percent at $59.20.