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On Wednesday, JPMorgan analysts downgraded PACCAR stock from Overweight to Neutral, adjusting the price target to $90 from the previous $105. The change reflects a shift in confidence regarding the company’s gross margin prospects amid a continuing downturn in the freight and truck market. According to InvestingPro data, five analysts have recently revised their earnings estimates downward, while the stock trades at a P/E ratio of 11.4x. PACCAR has revised its Class 8 industry sales forecast, now expecting a ~7% year-over-year decline for the US and Canada, which is a more pessimistic outlook compared to the 9% decrease in 2024.
The analysts at JPMorgan cited several factors influencing their decision. Firstly, despite initially expecting PACCAR’s gross margin to bottom out in the second quarter of 2025, the ongoing market challenges have led to a reassessment. The firm’s lowered sales outlook, with InvestingPro reporting a 4.17% revenue decline in the last twelve months, combined with a potential US recession in the second half of 2025 and anticipated truck price hikes due to existing tariffs, could further impair demand and volumes in the upcoming quarters. Despite these challenges, PACCAR maintains strong financial health with a 4.78% dividend yield and an impressive 55-year streak of consecutive dividend payments.
Additionally, the analysts expressed uncertainty over the first quarter’s margin drop, which was approximately 90 basis points below the mid-point of the guide despite deliveries being in line and the ’Liberation Day’ tariffs being announced after the first quarter. This unexpected margin decline has contributed to the reduced confidence in the company’s near-term financial performance.
JPMorgan also noted that the anticipated NOx-driven pre-buy, which typically occurs when customers purchase trucks ahead of stricter emission standards, is unlikely to bolster demand in 2025. Furthermore, the outlook for 2026 remains unclear, especially as long as macroeconomic and tariff uncertainties continue to affect the industry.
In summary, the downgrade and price target adjustment by JPMorgan reflect a cautious stance on PACCAR’s financial health and market position, given the current economic headwinds and industry-specific challenges. However, InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of PACCAR among 1,400+ top US stocks.
In other recent news, PACCAR Inc (NASDAQ:PCAR) reported its first-quarter 2025 financial results, showing mixed outcomes that may interest investors. The company exceeded revenue expectations with $7.4 billion, surpassing the anticipated $7.13 billion. However, its earnings per share (EPS) fell short, reporting $1.46 against a forecast of $1.60. Additionally, PACCAR Parts achieved record quarterly revenues of $1.7 billion, highlighting strong performance in that division. The company has announced plans for significant capital investments and research and development expenses in 2025, indicating a focus on innovation and capacity expansion. In terms of shareholder returns, PACCAR declared a regular quarterly cash dividend of $0.33 per share, payable in June 2025. This move reflects the company’s commitment to returning value to its shareholders. Despite these developments, PACCAR’s financial outlook remains uncertain due to potential tariff impacts and regulatory changes. Investors may also note the company’s forecasted EPS for future quarters, ranging from $1.14 to $1.65, with annual projections for 2025 and 2026 at $6.54 and $7.98, respectively.
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