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Tax Reform May Be PACCAR's Only Catalyst, Says Citi

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Tax Reform May Be PACCAR's Only Catalyst, Says Citi
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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

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."

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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Latest Ratings for PCAR

DateFirmActionFromTo
Nov 2017SusquehannaInitiates Coverage OnNeutral
Nov 2017CitigroupDowngradesBuyNeutral
Nov 2017ArgusUpgradesHoldBuy

View More Analyst Ratings for PCAR
View the Latest Analyst Ratings

Posted-In: Citigroup PACCAR taxes Timothy TheinAnalyst Color Downgrades Price Target Analyst Ratings Best of Benzinga

 

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