10 Best Manufacturing Stocks To Buy According to Analysts

4. PACCAR Inc (NASDAQ:PCAR)

Number of Hedge Fund Investors  in Q1 2024: 40

Average Analyst Share Price Upside: 25%

Average Analyst Share Price Target: $121.48

PACCAR Inc (NASDAQ:PCAR) is an automotive company that makes and sells trucks and associated products in the US. Its business model, which focuses on all ends of the truck supply chain from new vehicles to refurbishment parts and financing means that PACCAR Inc (NASDAQ:PCAR) is vulnerable to the broader US economy. Trucks and related logistics equipment stocks do well when the economy is growing and businesses are shipping more products. Therefore, the key to the stock’s performance is US GDP growth as well as low rates that allow businesses to place advance orders for its products. However, while PACCAR Inc (NASDAQ:PCAR) isn’t diversified when it comes to products, its refurbishment business can help it weather an economic downturn. This is because, during a slow economy, businesses shift their focus on maintaining their existing fleet, which allows PACCAR Inc (NASDAQ:PCAR) to capture demand through its refurbishment products.

PACCAR Inc (NASDAQ:PCAR) is aware of the risk of a slow economy and it has grown its parts businesses recently. Management shared some details on this front during the Q1 2024 earnings call:

“PACCAR achieved excellent truck parts and other gross margins of 19% in the first quarter. We anticipate second quarter margins to be strong and in a range of 18% to 18.5%. PACCAR Parts had an outstanding first quarter with parts gross margins of 32.5%. We estimate parts sales to grow by 4% to 6% in the second quarter following last year’s record performance. PACCAR Parts’ excellent long-term growth reflects the benefits of investments in transportation solutions that increase vehicle uptime and convenience for customers. PACCAR’s aftermarket parts business provides strong profitability through all phases of the business cycle.

PACCAR Parts has 19 parts distribution centers, or PDCs worldwide and is expanding its global distribution network with the construction of a new PDC in Germany which will open this year.”