PACCAR Inc PCAR
Verdict: Sell. Fair value $106 against a price of $118 on 6 Jan 2026, 10% below the price.
In plain words
The case for: Narrow competitive moat provides durability. Market leadership enables pricing power.
The case against: Intense competitive pressure could compress margins. The company has a low 25% earnings beat rate over the last 4 quarters, with an average surprise of....
Main risks
- Significant Revenue Deceleration: TTM revenue of $29.5B is down sharply from the 2023 peak of $35.1B, and 1-year growth is negative, indicating the company is in a cyclical downturn.
- Negative Forward Outlook & Poor Execution: Analyst price targets imply a -5.6% downside, and the company has a poor recent earnings surprise history (25% beat rate) including a large recent miss, signaling low visibility.
- Leverage-Dependent Returns: The high ROE (23.8%) is heavily reliant on financial leverage (D/E 0.91), while the estimated ROIC (9.2%) is mediocre. This structure amplifies risk during a downturn.
- The company has a low 25% earnings beat rate over the last 4 quarters, with an average surprise of...
- Intense competitive environment
- The company has a low 25% earnings beat rate over the last 4 quarters, with an average surprise of -0.1%. The quarter for 2025-03-31 showed a particularly large miss, with actual EPS of $0.96 versus an estimate of $1.59, a -39.6% surprise. This pattern suggests significant challenges in forecasting business performance or a tendency to provide overly optimistic guidance.