Paccar Drops; Double Downgrade Reflects Truck-Market Cycle

Paccar was double-downgraded to underperform as Bank of America's analyst sees the truck-replacement cycle nearing its end.
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Paccar  (PCAR) - Get Report shares dropped Friday after analysts at Bank of America double-downgraded the truck maker to underperform from outperform. 

Analysts at the firm say that while Class 8 heavy-truck orders have jumped above replacement rates in the past two months, the industry is showing signs that it's nearing the end of that cycle. 

"In our view, the market could be sensing the order cycle is entering 'as good as it gets' territory," Bank of America analyst Ross Gilardi said.

The current cycle may continue only "for another quarter or two," he said.

Bank of America also downgraded truck-component maker Allison  (ALSN) - Get Report to neutral and trimmed its price target on diesel-engine maker Cummins  (CMI) - Get Report

Last month, Paccar, Bellevue, Wash., reported third-quarter earnings of $1.11 a share, topping analyst estimates of 96 cents. Revenue from the company's trucks segment was $3.5 billion while parts revenue was $1.02 billion. 

Analysts were expecting revenue of $3.4 billion and $954 million from the segments respectively. 

Total revenue of $4.94 billion was ahead of analyst estimates for the period. 

At last check Paccar shares were trading down 1.9% at $88.31. Shares of Allison, Indianapolis, slipped 2.6% to $39.33. And shares of Cummins gave up 1% to $230.76.