Why Paccar Stock Popped Today

Key Points

• Paccar beat on sales this morning -- but sales fell 15% year over year.

• Paccar's profits decline was even worse, down 36% year over year.

• Paccar pays a nice dividend, though, doesn't have too much debt, and generates good free cash flow.

• 10 stocks we like better than Paccar ›

Shares of Paccar (NASDAQ: PCAR), one of the nation's biggest truck manufacturers, jumped 4.8% through 11:55 a.m. ET Tuesday after beating on sales and meeting on earnings in its Q2 report.

Analysts forecast Paccar would earn $1.37 per share in Q2, and Paccar nailed that target. Sales were only supposed to be $7 billion, however, but Paccar delivered revenue of $7.5 billion -- good news for truck demand and, potentially, for transportation stocks as well.

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Paccar Q2 earnings

Not all the news was good. Paccar beat expectations with its $7.5 billion in sales, but that was still down 15% from the $8.8 billion in business the truck company did a year ago. The decline in profits was worse -- down 36% year over year.

Executive VP Kevin Baney noted that despite the numbers, Paccar's Kenworth and Peterbilt brands are holding their own, with combined 30.4% market share in the U.S. and Canada in the first six months of this year. The two brands also have new electric trucks available for sale to regional haulers, with the Kenworth T680E and Peterbilt 579EV both able to travel up to 250 miles on a single charge.

Is Paccar stock a buy?

Priced at about 15.7 times trailing earnings (a little more than that with debt included in the equation) and paying a generous 4.6% dividend yield, Paccar stock isn't particularly expensive, though the declines in both sales and profits may give an investor pause.

Free cash flow is strong as well, about $2.9 billion, backing up about 94% of reported net income. Analysts only forecast about an 8% long-term earnings growth rate for the stock, however, making it still a bit pricey. Drop the share price 20% or so, and I'd be a buyer of Paccar stock.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.