PACCAR
PCAR
$116.06
-1.11%
Paccar Inc is a leading manufacturer of medium- and heavy-duty trucks sold under the premium Kenworth and Peterbilt nameplates in the Americas and Australia, and the DAF brand in Europe and South America, complemented by a growing aftermarket parts business and an internal finance subsidiary. The company commands roughly 30% of the North American Class 8 truck market and about 15% of the European heavy-duty market, giving it a distinct position as a premium, high-margin OEM rather than a volume-driven mass producer. The current investor narrative centers on a pronounced cyclical downturn in truck demand, with Q1 2026 revenue falling 16.2% year over year to $6.23 billion and gross margin compressing to 13.1% from 17.7% a year earlier, even as the parts and financial services segments provide ballast. Debate is intensifying over whether the freight recession is bottoming, with bulls pointing to AI-driven infrastructure and urbanization tailwinds for industrial equipment and bears focused on margin erosion and a payout ratio that has exceeded 95%.…
PCAR
PACCAR
$116.06
Investment Opinion: Should I buy PCAR Today?
The synthesized recommendation is Hold. The core thesis is that Paccar is a high-quality industrial with a strong balance sheet and a premium brand portfolio, but the current cyclical downturn and stretched trailing valuation create an unfavorable risk/reward at $116.06. The analyst consensus is buy with an average target of $144.80, implying 24.8% upside, but the wide target range of $125 to $164 and the lack of recent upgrades suggest moderate conviction.
Supporting evidence for the Hold rating includes: (1) the forward PE of 16.06x is reasonable if the consensus EPS of $7.84 is achieved, but trailing PE of 24.23x is near the top of its historical range; (2) revenue growth is negative at -16.2% year over year, with four consecutive quarters of sequential decline; (3) gross margin has compressed 460 basis points to 13.12%, and EBITDA of $801.8 million in Q1 2026 was the lowest in at least five quarters; (4) free cash flow of $3.27 billion comfortably covers the dividend, but the payout ratio of 95.4% is unsustainable if earnings decline further; and (5) the implied upside to the average analyst target is 24.8%, but the stock is down 8.95% over the past month, indicating the market is pricing in downside risks.
The biggest risks that could invalidate the thesis are a prolonged freight recession leading to further revenue and margin declines, a dividend cut that would likely trigger a sell-off, and valuation compression if forward estimates are cut. This Hold would upgrade to Buy if the stock pulls back to the $100-$105 range (implying a forward PE of 13-14x) or if Q2 2026 results show revenue stabilization and gross margin recovery above 15%. It would downgrade to Sell if revenue declines accelerate beyond 20% year over year or if the dividend is cut. Relative to its history and peers, the stock appears fairly valued on forward earnings but overvalued on trailing earnings, with the market pricing in a cyclical recovery that has yet to materialize.
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PCAR 12-Month Price Forecast
Paccar is a high-quality industrial facing a pronounced cyclical downturn, with revenue and margins declining sharply and a dividend that appears unsustainable at current earnings levels. The forward valuation of 16.1x is attractive if the consensus EPS of $7.84 is achieved, but the trailing PE of 24.2x and price-to-book of 2.99x suggest the market is still pricing in a recovery that has yet to materialize. The analyst consensus is bullish with a $144.80 average target, but the wide target range and lack of recent upgrades indicate moderate conviction, and the stock's recent underperformance suggests the market is trading closer to the bear case. I would upgrade to bullish if Q2 2026 results show revenue stabilization and gross margin recovery above 15%, or if the stock pulls back to the $100-$105 range, and I would downgrade to bearish if revenue declines accelerate or the dividend is cut.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on PACCAR's 12-month outlook, with a consensus price target around $144.80 and implied upside of +24.8% versus the current price.
Average Target
$144.80
0 analysts
Implied Upside
+24.8%
vs. current price
Analyst Count
—
covering this stock
Price Range
$125 - $164
Analyst target range
Fifteen analysts cover PCAR, and the consensus recommendation is a buy with a recommendation mean of 2.33 on a scale where lower is more bullish. The average target price is $144.80, which implies roughly 24.8% upside from the current price of $116.06, a substantial gap that suggests the sell-side views the recent pullback as an opportunity rather than a warning. The consensus leans bullish, but the distribution of ratings is more mixed than the headline suggests, with JP Morgan at Overweight, Evercore ISI at Outperform, and Morgan Stanley, Wells Fargo, Citigroup, and Truist all at Hold or Equal Weight. The target range spans from a low of $125.00 to a high of $164.00, a spread of 31.2% of the average target, which signals meaningful disagreement about the earnings recovery path. The high target of $164 implies roughly 41.3% upside and likely assumes a sharp cyclical rebound in Class 8 truck orders, margin recovery toward the 17-18% gross margin levels of early 2025, and multiple expansion as the market re-rates the stock on normalized earnings. The low target of $125, still 7.7% above the current price, appears to price in a prolonged freight recession with continued margin compression but no catastrophic deterioration. Institutional ratings show a stable-to-cautious pattern: Freedom Broker downgraded from Buy to Hold in March 2026, and no firm has upgraded since, while the most recent actions in July 2026 were reiterations of existing Overweight and Hold ratings. The wide target spread and lack of recent upgrades suggest conviction is moderate, and the stock's 8.95% one-month decline indicates the market is currently trading closer to the bear case than the consensus view.
Bulls vs Bears: PCAR Investment Factors
The bear case currently has stronger evidence, as the fundamental deterioration is concrete and accelerating: revenue down 16.2% year over year, gross margin compressed 460 basis points, and a payout ratio of 95.4% that is unsustainable if earnings continue to fall. The bull case rests largely on the forward-looking consensus that earnings will recover to $7.84 per share, which would make the stock cheap at 16.1x forward earnings, and on the parts and finance segments providing a buffer. The single most important tension is whether the freight recession is bottoming or deepening; if Q2 2026 revenue stabilizes and gross margin recovers toward 15%, the bull case gains credibility, but another quarter of double-digit revenue decline would likely trigger estimate cuts and a retest of the 52-week low. The market is currently trading closer to the bear case than the consensus view, as evidenced by the 8.95% one-month decline and the stock sitting at only 50.8% of its 52-week range.
Bullish
- Analyst consensus implies 24.8% upside: The average analyst target price is $144.80 versus the current price of $116.06, implying 24.8% upside, and even the lowest target of $125.00 sits 7.7% above the market price. With 15 analysts covering the stock and a consensus recommendation of buy (mean 2.33), the sell-side is clearly viewing the recent pullback as an opportunity rather than a structural warning.
- Forward PE of 16.1x is undemanding: The trailing PE of 24.23x drops to a forward PE of 16.06x based on the consensus EPS estimate of $7.84, a 33.7% discount that implies the market expects a meaningful earnings recovery. That forward multiple is roughly in line with or slightly below the broader industrials sector, suggesting the stock is not expensive if estimates are met.
- Parts and finance segments provide ballast: The parts business generates $6.40 billion in revenue (20% of sales) and the financial services segment adds $542 million (6% of sales), together providing recurring, higher-margin revenue that partially offsets the cyclicality of the trucks segment. This mix helps explain why net margin actually improved to 9.71% in Q1 2026 from 6.79% a year earlier despite the 16.2% revenue decline.
- Balance sheet strength supports dividend: The current ratio of 3.08 and debt-to-equity of 0.81 indicate ample liquidity and moderate leverage, while trailing free cash flow of $3.27 billion comfortably covers the $909.4 million in Q1 2026 dividends. The 3.94% dividend yield is unusually high for an industrial and may attract income-oriented investors if it is maintained.
Bearish
- Revenue down 16.2% with no clear bottom: Q1 2026 revenue of $6.23 billion fell 16.2% year over year from $7.44 billion, and the sequential trend has been deteriorating for four consecutive quarters: $7.51 billion in Q2 2025, $6.67 billion in Q3 2025, $6.82 billion in Q4 2025, and $6.23 billion in Q1 2026. This confirms a broad cyclical slowdown rather than a one-quarter anomaly, and the current run-rate suggests full-year 2026 revenue will fall well short of 2025 levels.
- Gross margin collapsed 460 basis points: Gross margin fell from 17.72% in Q1 2025 to 13.12% in Q1 2026, a 460 basis point compression that reflects negative operating leverage and pricing pressure as volumes decline. Q1 2026 EBITDA of $801.8 million was the lowest in at least five quarters, and the trailing gross margin of 16.23% remains under pressure.
- Payout ratio of 95.4% is unsustainable: The dividend payout ratio of 95.4% leaves almost no room for error if earnings continue to decline, and the 3.94% dividend yield is unusually high for an industrial, suggesting the market may be pricing in a dividend cut. With Q1 2026 net income of $605.3 million and dividends of $909.4 million, the company is paying out more than it earns on a quarterly basis.
- Stock-specific selling pressure: PCAR is down 8.95% over the past month against a roughly flat SPY (-0.96%), producing a relative strength of -7.99% and indicating stock-specific selling pressure rather than broad market weakness. With a beta of 0.972, the magnitude of this underperformance is notable and suggests investors are actively repricing cyclical risk.
PCAR Technical Analysis
PCAR is in a broad recovery that has stalled, with the stock up 14.4% over the past year but trading at $116.06, which is only about 50.8% of its 52-week range of $92.25 to $139.24. That mid-range positioning signals neither momentum-driven overextension nor deep-value territory; instead it reflects a market that has rewarded the stock over 12 months but is now questioning the durability of the advance. The 52-week high of $139.24 was set in late July 2026, and the failure to reclaim that level despite a positive 1-year return suggests the uptrend is losing conviction. Recent momentum has deteriorated sharply: the stock is down 8.95% over the past month and 2.43% over three months, a stark deceleration from the 4.31% six-month gain and a direct reversal of the 1-year uptrend. This divergence is meaningful because the 1-month decline of nearly 9% occurred against a roughly flat SPY (-0.96%), producing a relative strength of -7.99% and indicating stock-specific selling pressure rather than broad market weakness. With a beta of 0.972, PCAR is slightly less volatile than the market, so the magnitude of this underperformance is notable and suggests investors are actively repricing cyclical risk. Key support sits at the 52-week low of $92.25, roughly 20.5% below the current price, while resistance is the 52-week high of $139.24, about 20.0% above. A breakdown below the $110-$112 area that has held since May would open the door to a retest of the lows, whereas a breakout above $139 would confirm a new leg higher; the maximum drawdown of -16.03% shows the stock can fall materially when sentiment shifts, and the short ratio of 4.26 days indicates elevated bearish positioning that could amplify either direction.
Beta
0.97
0.97x market volatility
Max Drawdown
-16.0%
Largest decline past year
52-Week Range
$92-$139
Price range past year
Annual Return
+14.4%
Cumulative gain past year
| Period | PCAR Return | S&P 500 |
|---|---|---|
| 1m | -9.0% | -0.5% |
| 3m | -2.4% | +2.3% |
| 6m | +4.3% | +16.6% |
| 1y | +14.4% | +14.8% |
| ytd | +4.0% | +11.7% |
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PCAR Fundamental Analysis
Paccar's revenue trajectory has turned decisively negative, with Q1 2026 revenue of $6.23 billion representing a 16.2% year-over-year decline from $7.44 billion in Q1 2025. The multi-quarter trend is one of sequential deterioration: revenue fell from $7.51 billion in Q2 2025 to $6.67 billion in Q3 2025, $6.82 billion in Q4 2025, and $6.23 billion in Q1 2026, confirming a broad cyclical slowdown rather than a one-quarter anomaly. The parts and financial services segments, at $6.40 billion and $542 million respectively, provide recurring revenue that partially offsets truck volume weakness, but the trucks segment at roughly 74% of sales remains the dominant swing factor. For the investment case, the key question is whether this decline reflects a mid-cycle pause or the start of a deeper freight recession, and the current run-rate suggests full-year 2026 revenue will fall well short of 2025 levels. Profitability remains solid in absolute terms but is compressing rapidly: Q1 2026 net income was $605.3 million with a net margin of 9.71%, down from $505.1 million and a 6.79% net margin in Q1 2025, though the prior-year quarter was distorted by a $242 million other-expense swing. Gross margin has fallen from 17.72% in Q1 2025 to 13.12% in Q1 2026, a 460 basis point compression that reflects negative operating leverage and pricing pressure as volumes decline. The trailing gross margin of 16.23% and operating margin of 10.41% remain respectable for heavy machinery, but the direction of travel is unfavorable, and the Q1 2026 EBITDA of $801.8 million was the lowest in at least five quarters. The balance sheet is a genuine strength: the current ratio of 3.08 and debt-to-equity of 0.81 indicate ample liquidity and moderate leverage, while trailing free cash flow of $3.27 billion comfortably covers the $909.4 million in Q1 2026 dividends. However, the payout ratio of 95.4% is a red flag, as it leaves little room for error if earnings continue to decline, and the dividend yield of 3.94% is unusually high for an industrial, suggesting the market may be pricing in a dividend cut. ROE of 12.33% and ROA of 4.12% are healthy but trending lower, and the company's reliance on its finance arm means credit conditions and used-truck values will be important swing factors for cash generation.
Quarterly Revenue
$6.2B
2026-03
Revenue YoY Growth
-16.2%
YoY Comparison
Gross Margin
13.1%
Latest Quarter
Free Cash Flow
$3.3B
Last 12 Months
Revenue & Net Income Trends (2 Years)
Revenue Breakdown
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Valuation Analysis: Is PCAR Overvalued?
Because Paccar is profitable with trailing net income of $605.3 million in the most recent quarter and positive EPS of $0.04 on a trailing basis, the PE ratio is the appropriate primary metric. The trailing PE of 24.23x compares with a forward PE of 16.06x, a 33.7% discount that implies the market expects earnings to grow meaningfully over the next twelve months, consistent with the analyst consensus EPS estimate of $7.84. That gap is wide for an industrial and suggests either that the market is pricing in a cyclical recovery or that trailing earnings are temporarily depressed by the revenue downturn. Relative to the broader industrials sector, PCAR's forward PE of 16.1x is roughly in line with or slightly below the sector average, while its price-to-sales of 2.03x and EV/EBITDA of 15.95x suggest a modest premium to some machinery peers. The PEG ratio of -0.56 is not meaningful given negative earnings growth, but the price-to-book of 2.99x is above the 2.6-2.8x range seen through much of 2022-2023, indicating the market still assigns a quality premium. Historically, PCAR's PE has ranged from roughly 9x in late 2023 to over 25x in early 2026, and the current 24.2x trailing multiple sits near the top of that band. The PS ratio of 2.03x is below the 6-9x range reported in the historical ratios data, though that discrepancy likely reflects different share-count or data conventions, and the more reliable signal is that the stock is not cheap on trailing earnings. If the forward EPS estimate of $7.84 is achieved, the stock trades at 14.8x forward earnings, which would be a reasonable entry point for a premium industrial; if estimates are cut, the valuation support could quickly erode.
PE
24.2x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 9x~26x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
15.9x
Enterprise Value Multiple
Investment Risk Disclosure
Paccar's financial risks are mounting as the cyclical downturn persists. Revenue fell 16.2% year over year in Q1 2026 to $6.23 billion, and gross margin compressed 460 basis points to 13.12%, reflecting negative operating leverage as truck volumes decline. The payout ratio of 95.4% is a red flag, as Q1 2026 dividends of $909.4 million exceeded net income of $605.3 million, leaving little room for error if earnings continue to decline. While the balance sheet remains strong with a current ratio of 3.08 and debt-to-equity of 0.81, the company's reliance on its finance arm means credit conditions and used-truck values will be important swing factors for cash generation.
Market and competitive risks are elevated given the stock's premium valuation and cyclical exposure. The trailing PE of 24.23x sits near the top of its historical range, and the price-to-book of 2.99x is above the 2.6-2.8x range seen through much of 2022-2023, leaving little room for error if earnings disappoint. The stock's beta of 0.972 indicates it is slightly less volatile than the market, but the recent 8.95% one-month decline against a flat SPY (-0.96%) shows that stock-specific selling pressure can be severe. Competitive threats from lower-cost truck manufacturers and the risk of a prolonged freight recession could further pressure pricing and market share.
In a worst-case scenario, a continued freight recession would lead to further revenue declines, margin compression, and a dividend cut, triggering a sell-off toward the 52-week low of $92.25, which is 20.5% below the current price of $116.06. The analyst low target of $125.00 is still 7.7% above the current price, but if estimates are cut, the stock could trade below that level. A realistic downside scenario would see the stock fall to the $92-$100 range, representing a loss of 14% to 21% from the current price, with the maximum drawdown of -16.03% showing that the stock can fall materially when sentiment shifts.
FAQ
The key risks of holding PCAR are ranked by severity as follows: (1) Financial risk: the payout ratio of 95.4% is unsustainable if earnings continue to decline, and a dividend cut would likely trigger a significant sell-off; (2) Cyclical risk: revenue is down 16.2% year over year with four consecutive quarters of sequential decline, and a prolonged freight recession could push the stock toward its 52-week low of $92.25; (3) Valuation risk: the trailing PE of 24.23x is near the top of its historical range, and any estimate cuts could lead to multiple compression; and (4) Competitive risk: lower-cost truck manufacturers could pressure pricing and market share, particularly in international markets. The stock's beta of 0.972 indicates it is slightly less volatile than the market, but the recent 8.95% one-month decline shows that stock-specific risks can be severe.
The 12-month forecast for PCAR includes three scenarios: a bull case with 25% probability targeting $144-$164, a base case with 50% probability targeting $125-$145, and a bear case with 25% probability targeting $92-$110. The base case is most likely, assuming revenue declines moderate to single digits in the second half of 2026 and gross margin stabilizes around 13-14%, with earnings meeting the consensus estimate of $7.84. The bull case requires a sharp rebound in Class 8 truck orders and margin recovery toward 16-17%, while the bear case assumes a deepening freight recession and a dividend cut. The analyst average target of $144.80 aligns with the upper end of the base case, implying 24.8% upside from the current price of $116.06.
PCAR appears fairly valued on forward earnings but overvalued on trailing earnings. The trailing PE of 24.23x is near the top of its historical range of 9x to 25x, while the forward PE of 16.06x is roughly in line with or slightly below the broader industrials sector. The price-to-book of 2.99x is above the 2.6-2.8x range seen through much of 2022-2023, indicating the market still assigns a quality premium. The market is pricing in a cyclical recovery, as evidenced by the 33.7% discount between trailing and forward PE, but if the consensus EPS of $7.84 is not achieved, the valuation support could quickly erode. Relative to peers, the stock is not cheap on trailing metrics, but the forward multiple is reasonable if earnings recover as expected.
From a risk/reward perspective, PCAR is a Hold rather than a Buy at the current price of $116.06. The analyst consensus target of $144.80 implies 24.8% upside, and the forward PE of 16.06x is reasonable if the consensus EPS of $7.84 is achieved, but the trailing PE of 24.23x is near the top of its historical range and the company is facing a 16.2% revenue decline with a 95.4% payout ratio. The biggest downside risk is a dividend cut or further estimate cuts, which could push the stock toward the 52-week low of $92.25, representing a 20.5% loss. For long-term investors with a 2-3 year horizon, the stock could be a good buy on a pullback to the $100-$105 range, but at current levels, the risk/reward is balanced and the near-term catalysts are uncertain.
PCAR is more suitable for long-term investment than short-term trading. The company is in a cyclical downturn with negative revenue growth and margin compression, and the stock has a beta of 0.972, indicating it is slightly less volatile than the market. The dividend yield of 3.94% is attractive for income-oriented investors, but the 95.4% payout ratio raises concerns about sustainability. Earnings visibility is low given the freight recession, and the stock is down 8.95% over the past month, suggesting near-term volatility. A suggested minimum holding period is 2-3 years to allow the freight cycle to turn and for the company's parts and finance segments to provide growth. Short-term traders may find opportunities around earnings announcements, but the risk/reward is less favorable given the uncertain outlook.