Key Takeaways:
- Market Share Growth: 30% in U.S./Canada Class 8 trucks, with advantages from Section 232 tariffs.
- Price Projection: Based on current execution, PCAR stock could reach $134 by December 2028.
- Potential Gains: This target implies a total return of 11% from the current price of $121.
- Annual Return: Investors could see roughly 3.7% growth over the next 2.9 years.
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PACCAR Inc (PCAR) just delivered its fourth-highest profit year in company history. The truck manufacturer posted 2025 revenues of $28.4 billion and adjusted net income of $2.64 billion, marking its 87th consecutive year of profitability.
- CEO Preston Feight is executing a manufacturing strategy that builds trucks locally for local markets across the United States, Canada, and Mexico.
- This approach provides significant cost advantages now that Section 232 tariffs are in effect.
- With emissions clarity secured for the EPA27 standard and freight markets showing signs of recovery, PACCAR’s Kenworth, Peterbilt, and DAF brands captured a 30% market share in 2025.
- Fourth quarter gross margins hit 12%, with management projecting an increase to 12.5-13% in the first quarter.
PACCAR Parts and Financial Services both achieved record revenues, now representing a larger share of the business and contributing to more stable earnings through the cycle. The company returned $2.72 per share to shareholders through dividends in 2025.
Despite soft freight markets in 2025, PACCAR stock trades at $121, offering potential upside for investors who recognize the company’s competitive positioning as the market recovers.
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What the Model Says for PACCAR Stock
We analyzed PACCAR through its transformation into a diversified transportation solutions provider with structural manufacturing advantages.
- The company eliminated cross-border tariff costs by producing trucks locally.
- Chillicothe and Denton now build medium-duty trucks for the U.S. market, while Canadian facilities produce all product lines for Canadian customers.
- This flexibility drove margin improvement despite fourth-quarter inefficiencies from the factory transitions.
Order intake accelerated in December and remained strong into January. Management sees sequential growth through 2026 as freight conditions improve and customers gain clarity on the EPA27 emissions standard, which takes effect in January 2027.
Using a forecast of 7.0% annual revenue growth and 12.3% operating margins, our model projects the stock will rise to $134 within 2.9 years. This assumes a 14.7x price-to-earnings multiple.
That represents compression relative to PACCAR’s one-year P/E average of 17.5x, but a premium to its five-year average of 13.7x.
The moderate multiple accounts for near-term freight softness, while recognizing that improving fundamentals, driven by regulatory clarity, are driving customer buying decisions.
The real value lies in capturing market share gains from Section 232 advantages and capitalizing on the EPA27 prebuy expected in late 2026.
Our Valuation Assumptions
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for PCAR stock:
1. Revenue Growth: 7.0%
PACCAR’s growth centers on market recovery and manufacturing advantages.
The North American Class 8 truck market is forecast at 230,000 to 270,000 vehicles in 2026, similar to 2025’s 233,000 units.
Management expects acceleration through the year as freight rates improve and carrier profitability returns. Spot rates rose in December, signaling that the truckload segment is beginning to recover.
The less-than-truckload and vocational segments where PACCAR leads remain steady. Customers are gaining confidence from regulatory clarity and improved economic conditions.
In Europe, DAF trucks won the prestigious International Truck of the Year Award for the XF and XD electric models. The above 16-tonne market is forecast at 280,000 to 320,000 registrations in 2026.
2. Operating margins: 12.3%
PACCAR is expanding margins while eliminating tariff headwinds.
First quarter margins are expected to reach 12.5-13%, up from 12% in the fourth quarter. The improvement stems from favorable price-cost dynamics and manufacturing efficiencies following the local-for-local transition.
Fourth quarter margins were impacted by overtime costs and factory adjustments to eliminate cross-border shipments. These inefficiencies won’t recur in 2026. Materials represent 80-85% of the cost of goods sold, making procurement gains meaningful.
Management eliminated tariff surcharges for 2026, resulting in modest price slides offset by larger cost reductions. This creates a positive price-cost in the first quarter.
3. Exit P/E Multiple: 14.7x
The market values PACCAR at 21.1x trailing earnings. We assume the P/E will compress to 14.7x over our forecast period.
Near-term freight market uncertainty weighs on the multiple. However, as manufacturing advantages compound and the EPA27 transition creates pre-buy demand, PACCAR may command a premium valuation.
PACCAR Parts grew revenues 3% to a record $6.9 billion in 2025, with 4-8% growth expected in 2026. Financial Services increased market share to 27%, up two percentage points. These stable, high-margin businesses support valuation through economic cycles.
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What Happens If Things Go Better or Worse?
Truck manufacturers face economic cycles and regulatory transitions. Here’s how PACCAR stock might perform under different scenarios through December 2028:
- Low Case: If revenue growth slows to 4.9% and margins compress to 11.5%, investors would realize a 2.3% total loss (0.5% annually).
- Mid Case: With 5.4% growth and 12.5% margins, we expect a total return of 20.7% (3.9% annually).
- High Case: If market recovery accelerates and PACCAR maintains 13.3% margins while growing at 5.9%, total returns could reach 45.4% (7.9% annually).
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The range reflects execution of Section 232 advantages, success in capturing EPA27 prebuy demand, and the timing of freight market recovery. In the low case, freight conditions remain weak through 2027, or competitors offset tariff costs.
In the high case, freight markets rebound strongly, the EPA27 prebuy exceeds expectations, and PACCAR’s manufacturing flexibility drives meaningful share gains.
How Much Upside Does PACCAR Stock Have From Here?
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All it takes is three simple inputs:
- Revenue Growth
- Operating Margins
- Exit P/E Multiple
If you’re not sure what to enter, TIKR automatically fills in each input using analysts’ consensus estimates, giving you a quick, reliable starting point.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
