The recent recession forced most transportation companies to severely cut back spending on new trucks. This has been good news for truck parts outlets, horrible news for truck manufacturers. Now that the economy is improving, transportation companies will begin opening their check books for new trucks. This is indeed good news for truck manufacturers.
One manufacturer that is likely to benefit most is the maker of Peterbilt and Kenworth trucks, Paccar. Although only expected by most analysts to make $00.90 per share in earning this year, the company could easily double those earnings next year. In fact, the probability is favorable that Paccar will reach 2006 record high earnings of $4.00 in just a few years.
Why be so optimistic on the growth of Paccar's earnings? It is simply that demand for new trucks will likely double next year. Truck sales are at a twenty year low. The lack of new supply has increased the sticker price of used trucks, creating greater trade in value on older trucks that need replacing. Also, cargo weights have been steadily rising. An excellent indicator of an improving economy and greater demand for new trucks.
Replacing old trucks with new trucks they shall. With increasing diesel costs and ever stricter emissions regulations, transportation firms will have a much greater need for newer, fuel efficient and regulation approved vehicles. Paccar is ramping up now to meet the need. Smart transportation value stock investors will begin adding to portfolios now and enjoy the ride higher over the next few years.
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