Global Hunter Initiates Coverage On PACCAR As A 'Top Pick'

Global Hunter Securities initiated coverage on PACCAR Inc PCAR Thursday with a Buy rating, $78 price target and named it a “top pick.”

Analyst Michael Shlisky noted that “PCAR’s stock is trading at or near all-time highs at the current time, and the multi-year highs in industry conditions and our TDF Index are not likely to last indefinitely.”

Despite trading at all time highs, Shlisky viewed “PCAR as a mature operator that is able to execute through both up and down cycles. Barring the extreme conditions seen in 2009, PCAR should be able to maintain its policy of paying out approximately 50 percent of its net income in dividends.”

Shilsky commented that “as long as markets remain robust, the company should also have the ability to generate additional free cash flow for both growth investments as well as share repurchases.”

The analyst noted concluded with the belief that “PCAR should trade at a premium to peers given its track record of strong execution, robust end-market tailwinds, and the earnings impact of higher engine penetration and newmarket expansion over the long term.

The $78 price target represented 18x the firm’s CY15 EPS estimate (vs. peers at approximately 16x).

PACCAR Inc closed at $69.45 Thursday, up 1.67 percent.