Deutsche Bank upgraded shares of PACCAR (NASDAQ:PCAR) to Buy from Hold, raising the price target on the stock to $115 from $94 per share.
Analysts said the 2024 consensus for the company is too low, and the stock looks too cheap.
"PACCAR is a best-in-class Machinery company that has historically executed very well in a downturn given relatively mild decremental margins - and the company's Parts business has continued to grow as a percent of sales, creating a clear cycle-over-cycle uplift in profitability and reducing earnings cyclicality vs. history," the analysts declared.
"Moreover, we see strong potential for continued share gain vs. truck OEM peers on the back of strong customer reception to PCAR's new line of trucks," they added. "And while we understand concerns over the trajectory of NA/EU heavy-duty truck production in an uncertain macro environment, we think current 2024 consensus already embeds an overly draconian outcome - and PCAR's stock looks too cheap, even if this draconian outcome proves true."
Analysts also noted that the downturn could be short-lived. They believe that if their firm's model is right, PACCAR's 2024 EPS could be nearly $1 ahead of the current Street forecast.