Analyst Note| Dawit Woldemariam |
Narrow-moat-rated Paccar posted strong first-quarter results, thanks to strong global freight demand. We raised our fair value estimate to $103 from $101 previously to account for higher parts revenue and the time value of money since our last update. In the quarter, sales growth for Paccar’s parts business surged 20% year on year, largely due to higher truck utilization and elevated average fleet ages. Over the past year, supply headwinds have limited new truck production, which has forced many fleet owners to run existing trucks a lot longer than they would on average. This had led to greater parts consumption to keep trucks on the road to meet strong freight demand. As a result, we now expect Paccar’s parts business to grow by 11% year on year compared with our previous estimate of 10% year-on-year sales growth.