Why Paccar Inc. Stock Could Rally 20%

1 Strong industry fundamentals

Paccar delivered 41,600 trucks in the second quarter – an 8% increase year over year

Rising truck deliveries

Near-record freight tonnage in the U.S.Strong housing and automotive marketsImproved demand from Europe – Paccar’s DAF brand reported a 60% jump in Q2 order intake

What’s fueling demand?

Paccar’s projections for 2015

Market/regionIndustry sales (units)

2015 forecast 2014 actual

US and Canada: Class 8 trucks 270,000-290,000 2,50,000

Europe: >16-ton trucks 240,000-260,000 2,27,000

The U.S. and Canada, together with Europe, made up 87% of Paccar’s total truck sales in 2014.

Why that’s important

2 Growing market share

Substantial growth over the years

Source: Paccar Q2 Investor Presentation

U.S. and Canadian heavy-duty truck market: 28%Europe heavy-duty market: 15%, up from 13.8% last year

Year-to-date market share

Strong brand nameInnovative leadershipExtensive dealership networkLeadership in the natural-gas vehicle market

What’s helping Paccar grow

Trucks move nearly 70% of the freight tonnage in the U.S. A stronger foothold in such an essential industry is a key competitive advantage for Paccar.

Why that’s important

3 On track to a strong growth year

Revenue grew 11% year over yearNet income surged 40% year over year to hit record highGross margin climbed to 15.1% from 12.8% a year ago

Paccar delivered a solid Q2

On track to a strong year

Source: Paccar Q2 Investor Presentation

2014 was a record year for Paccar in terms of revenue, and second-best in terms of net income. The company looks poised to deliver another strong year.

Why that’s important

Now that’s certainly a bargain!

Analysts estimate Paccar’s earnings to grow a staggering 23% this year, outperforming the industry. For the potential growth, the stock costs only 12 times forward earnings today.

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