Is PACCAR (PCAR) a Late-Cycle Hold or a Buy-the-Dip Opportunity?

The question on every investor's mind about PACCAR (PCAR) is whether this industrial stalwart is a late-cycle hold or a compelling buy-the-dip opportunity. With the market teetering between optimism and caution, PCAR's valuation metrics and long-term fundamentals demand a closer look. Let's break it down.

Valuation Dislocation: Overpriced or Fairly Valued?

Right now, PCAR trades at a trailing P/E of 21.88, a 37% premium to its 3-year average of 12.3 and a 22% jump from its 5-year average of 14.61. That's not chump change, but context matters. The stock's P/E is still 37% below the Industrials sector average of 26.66 and outperforms peers like Ford (F) and Oshkosh (OSK), which trade at 14.8 and 13.89, respectively according to data. Meanwhile, the EV/EBITDA of 17.13 according to analysis sits in line with its historical trajectory, and the P/B ratio of 3.03 according to analysis reflects a healthy premium to book value.

Here's the rub: PCAR's current P/E is 7% above its 10-year average of 15.75, suggesting some optimism is baked in. But given its robust margins and dominant position in the Class 8 truck market, is this optimism justified-or is the stock still a relative bargain in a sector where "cheap" is a relative term?

Long-Term Growth: Tariffs, Margins, and Margin of Safety

The real story here isn't just valuation-it's the catalysts propelling PCAR's long-term potential. JPMorgan recently upgraded the stock to Overweight, citing the impending Section 232 truck tariffs set to take effect in November 2025. These tariffs, which impose 25% duties on imported heavy-duty trucks, are a tailwind for PCAR, which produces 93% of its North American trucks domestically. Analysts argue this could spark a margin recovery, a narrative that's hard to ignore.

Earnings growth forecasts are equally compelling. Analysts expect PCAR to deliver 15.7% annual earnings growth through 2027, driven by its expanding parts and financial services divisions. In Q3 2025 alone, these segments contributed $410 million and $126.2 million in pretax profit, respectively. Throw in a "Moderate Buy" consensus rating and a $109.12 average price target (versus a current price of ~$111.63), and the stock isn't just about short-term noise-it's about durable, structural growth.

The Cramer Take: Buy the Dip or Ride It Out?

So where does this leave us? PCAR's valuation isn't screaming "bargain," but it's far from "overpriced." The stock's P/E premium reflects confidence in its ability to outperform a sector still reeling from macroeconomic headwinds. And with JPMorgan's $133 price target implying 18% upside, the margin of safety here is intriguing.

But let's not get carried away. A "buy-the-dip" play requires a catalyst-and PCAR has one in the form of the Section 232 tariffs. If these tariffs ignite a rally in domestic truck demand, PCAR could see a re-rating. However, if the market views the current valuation as stretched relative to its forward P/E of 19.12, a pullback isn't out of the question.

Final Verdict: A Calculated Bet

PCAR isn't a no-brainer "buy-the-dip" in the classic sense, but it's close. The stock is trading at a discount to its sector and peers while sitting on a fortress balance sheet and a growth engine in its parts and financial services divisions. For investors with a 2–3 year horizon, the combination of margin tailwinds, earnings growth, and a defensive industrial play makes PCAR a compelling addition-especially if the market overcorrects ahead of the tariff-driven optimism.

In the end, this is a stock that rewards patience. If you're willing to hold through the noise and let the fundamentals play out, PCAR could be one of those late-cycle gems that turns a dip into a dip you're happy to buy.