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PACCAR Inc (NASDAQ:PCAR) may be left with few stock catalysts. With the upside potential limited by the timing of the trucking cycle, Citigroup said in a Wednesday note that it's moving to the sidelines.
The Analyst
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Citigroup analyst Timothy Thein downgraded shares of PACCAR from Buy to Neutral and lowered his price target from $81 to $75, citing a lack of catalysts.
With PACCAR likely to be one of the biggest beneficiaries of corporate tax reform, any further progress on tax reform poses upside risk to the company's multiple in the near term, Thein said. (See Thein's track record here.)
The Thesis
Trucking fundamentals in most of PACCAR's major geographies are likely to remain solid through 2018, Thein said in a Tuesday note. The concern is around the target multiple, as historically multiples compress when North American build rates eclipse trend levels, the analyst said.
"With '18 consensus build forecasts having moved well +300K (above trendline) history points to a more challenging backdrop for PCAR to outperform."
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Since the concern is only about the multiples, Citi raised its 2018 earnings per share estimate by 10 cents, factoring in updated global truck sales, with some assumed demand pull-forward in North America. Citigroup trimmed its 2019 estimate by 15 cents.
The Price Action
PACCAR shares are up about 8 percent in the year-to-date period.
At last check, the shares were up 1.36 percent to $69.46.
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Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.