PACCAR rallies after bull call from Morgan Stanley as the cleanest play on Class 8 upside
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PACCAR (NASDAQ:PCAR) is on watch on Wednesday after Morgan Stanley upgraded the vehicle maker to an Overweight rating after having it set at Equal-weight.
The firm's analysis of deferred replacement suggests that the North American Class 8 market backdrop will remain more resilient than consensus appreciates in 2023, with PCAR called the cleanest play on this theme.
"With early signs of supply chain improvement (as evidenced by PCAR's own delivery forecasts, recent Class 8 order trends and broader commentary from the ISM), we think that this deferred replacement will support 2023 Class 8 production - driving our Class 8 industry/PCAR revenue estimates ~7%/6% above consensus in '23," noted analyst Dillon Cumming.
Cumming and team also see a compelling case for margin upside for PCAR given an "overly draconian scenario" currently embedded in consensus, relative to the level of price/cost and supply chain improvement seen to date.
Morgan Stanley assigned a price target of $136 to PACCAR.
Shares of PCAR rose 1.55% premarket to $103.79 vs. the 52-week trading range of $77.00 to $107.18.