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JPMorgan Chase Downgrades PACCAR to ‘Underweight’

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PACCAR’s price movement

PACCAR (PCAR) has a market cap of $17.1 billion. Its stock fell by 6.0% to close at $48.88 per share on June 27, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were -11.0%, -11.9%, and 4.1%, respectively, on the same day. PCAR is trading 11.3% below its 20-day moving average, 12.3% below its 50-day moving average, and 5.3% below its 200-day moving average.

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Related ETF and peers

The First Trust NASDAQ-100 Ex-Technology Sector Index Fund (QQXT) invests 1.7% of its holdings in PACCAR. The ETF tracks an equal-weighted index of NASDAQ-100 stocks excluding technology companies. The YTD price movement of QQXT was -11.4% on June 27.

The market caps of PACCAR’s competitors are as follows:

  • Cummins (CMI): $18.0 billion
  • CNH Industrial (CNHI): $9.6 billion
  • Penske Automotive Group (PAG): $2.7 billion

PACCAR’s rating

JPMorgan Chase has downgraded PACCAR’s rating to “underweight” from “neutral.” It also reduced the stock’s target price to $47 from $58 per share.

The company may face Brexit challenges due to its exposure in Europe, with 24% of revenue and 31% of new truck deliveries in Europe in fiscal 2015.

TheStreet Ratings rated the stock a “buy” with a score of “B-.”

PACCAR’s performance in fiscal 1Q16

In its truck, parts, and other segment, PACCAR reported fiscal 1Q16 net sales and revenues of $4.0 billion, a fall of 11.1% compared to net sales and revenues of $4.5 billion in fiscal 1Q15. It reported European commission charges of $942.6 million in fiscal 1Q16.

In fiscal 1Q16, revenue from financial services rose 1.7% to $289.4 million as compared to fiscal 1Q15. Its net income and EPS fell to -$594.6 million and -$1.69, respectively, in fiscal 1Q16, compared to $378.4 million and $1.06, respectively, in fiscal 1Q15.

PACCAR’s cash and marketable debt securities fell by 4.3%, and its inventories rose by 4.1% in fiscal 1Q16 compared to fiscal 4Q15. Its debt-to-equity ratio rose to 2.4x in fiscal 1Q16 compared to 2.0x in fiscal 4Q15.

In the next part of this series, we’ll take a look at Thor Industries.

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