Paccar: Notable Insider Selling After A Big Rally

seekingalpha04-03

Paccar shares have surged 50% since late October, but there has been notable insider selling earlier this year.The company reported strong Q4 earnings, beating both revenue and profit expectations as ...

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(NASDAQ:PCAR) in the spotlight. The shares of the maker of the Kenworth and Peterbilt truck brands have rocketed up by 50% since their recent lows in late October. However, there was some notable insider selling in the equity earlier in 2024 when shares were trading some 20% lower than they are now. A sign it might be time to take some profits in this name? An analysis follows below. Seeking Alpha Company Overview and Recent Results: This well-known manufacturer is headquartered in Bellevue, Wash., and operates out of three primary business segments: Truck, Parts, and Financial Services. The company sells trucks throughout North America and internationally. Paccar along with Freightliner from Mercedes-Benz Group AG (OTCPK:MBGAF) and Navistar that was acquired by a division of Volkswagen (OTCPK:VWAGY) in 2021 control the majority of the North American market.  Cummins Inc. (CMI) is another significant player. Paccar has consistently gained market shares in recent decades. With the recent rally in the equity, the stock trades around $122.00 a share and has an approximate market capitalization of $64.5 billion.   January 2023 Company Presentation Paccar posted its fourth quarter results on Jan. 23. The company reported blowout numbers as it earned $2.70 a share on a GAAP basis, more than 50 cents a share above the consensus. Revenues rose 11.7% on a year-over-year basis to $9.08 billion, nearly $800 million over expectations. Net income rose to just under $1.42 billion from just $921 million in 4Q2022, thanks to a significant increase in margins in both Parts and Truck segments.   February 2024 Company Presentation   February 2024 Company Presentation Parts revenues clocked in at $1.61 billion (up from $1.47 billion in 4Q2022) while financing revenue came in at $113 million (down from $151.3 million in the same period a year ago). The bulk of sales or just over $7.35 billion came from the sale of commercial trucks. Trucks delivered in Q4 came in at 51,100, slightly below the same period a year ago. For 2023, the company delivered 204,200 trucks, a bit over a seven percent increase from 2022.   February 2024 Company Presentation Industry wide, Class 8 truck sales of 297,000 commercial vehicles in the U.S. and Canada were recorded in 2023 and there were 110,000 16-tonne commercial truck sales in South America. This is predicted to be in a range of 260,000 to 300,000 class 8 trucks in FY2024 for the U.S. and Canada and between 105,000 to 115,000 16-tonne trucks in South America. Overall European 16-tonne truck sales are projected to fall to 260,000 to 300,000 vehicles from 343,000 in 2023. Management has provided capital expenditure guidance of $700 million to $750 million for FY2024 after recording capex costs of $698 million in FY2023. R&D costs are projected to be in a range of $460 million to $500 million in FY2024, a significant increase from $411 million in FY2023. Management did not provide FY2024 sales or earnings guidance, but based on their projections of industrywide truck sales in this fiscal year, it's going to be a year of much lower growth for this sector and Paccar even if they continue to take market share. Insider Selling and Other Concerns: From Jan. 28 to Feb. 12, several company insiders including the CEO and CFO sold nearly $20 million worth of shares collectively. Prices sold ranged from $102.28 to $106.08 a share. All trades were significantly below the current level of the shares. This is a noticeable uptick in insider selling. For example, less than $3 million shares were sold by insiders in the fourth quarter of 2023, when the shares traded in the high $80s. In addition, the commercial trucking outlook is uncertain in 2024 for myriad reasons. Economic growth is unlikely to see the same robust GDP growth as the last two quarters. Higher interest rates obviously make big rigs more costly to finance. The industry also got a huge tailwind from the huge infrastructure legislation that was passed via the ironically name Inflation Reduction Act in the summer of 2022. These impacts will fade in coming years.   February 2024 Company Presentation Conclusion: Last week, RBC Capital initiated the shares as a Sector Perform with a price target of $123.00 a share. The analyst at RBC likes the company's asset-light model and cash generation but cautioned that the \"combination of falling truck demand with outsize price increases that will remain 'harder to push through' leaves risks skewed to the downside.\" After earning $8.76 a share in FY2023 on $35.13 billion in revenues, the current analyst firm consensus has earnings falling to $8.09 a share as sales fall to just less than $32 billion for the fiscal year. They project profits will rebound to $8.54 a share in FY2025 sales growth of 6%. The stock also pays a quarterly and annual dividend that has averaged 3.8% annually over the past decade. For FY2023, Paccar paid out $4.24 a share in total dividend payouts. January 2024 Company Presentation The company is quite well run, has a rock-solid balance sheet and no unfunded pension obligations. However, shares are currently priced at over 14 times trailing earnings for a cyclical manufacturer whose earnings are projected to be less in FY2025 than in FY2023. In addition, after seeing top-line revenue growth of 25% last fiscal year, sales growth will slow significantly over the next couple of years. Since Q4 numbers hit the wires, analyst firms have reissued three Buy ratings and three Hold ratings on PCAR. The average price target from those half dozen ratings is $120 a share, slightly below the current trading levels of the stock. Given all of the above, the prudent thing to do would seem to be to follow the insiders and take some profits in PCAR after a better than 50% rally over the past five months.   January 2023 Company Presentation  Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2424823973"}