Reviving industrial activities with the recovery of the global economy are driving increased demand for interstate cargo transportation, which in turn is heightening the demand for commercial trucks.

Noteworthy progress in COVID-19 vaccination programs worldwide, and favorable fiscal and monetary policies, should boost the demand further. Moreover, the rising popularity of electric vehicles (EVs) and substantial government incentives to encourage growth in the sector have led to increased production of electric commercial trucks. According to Adroit Market Research, the global heavy-duty trucks market size is expected to grow to $225.9 billion in 2025.

Given this backdrop, we think the shares of prominent commercial truck manufacturers Volvo ADR (VLVLY), Cummins Inc. (CMI) and PACCAR Inc (PCAR) should deliver  significant returns.

Volvo ADR (VLVLY)

Based in Sweden, VLVLY manufactures and sells trucks, buses, construction equipment, and marine and industrial engines. Its segments are trucks, construction equipment, buses, Volvo Penta, group functions & other, and financial services. The company operates in 18 countries and sells its products in more than 190 markets.

On June 2, Volvo Penta, a wholly owned subsidiary of VLVLY, announced the acquisition of marine battery systems pioneer ZEM AS. This should allow VLVLYto strengthen its market presence in the marine engines industry.

On April 26, VLVLY signed agreements to acquire 60% of Designwerk Technologies AG to accelerate its electromobility transformation. This move should facilitate VLVLY’s zero-emission vehicle production, thereby strengthening its position in the industry.

VLVLY’s net sales increased 2.8% year-over-year to SEK94.02 billion ($11.10 billion) in the fiscal first quarter, ended April 4. Its income for the period stood at SEK9 billion ($1.06 billion), up 88.9% from the same period last year. Its operating income grew 63.6% from its  year-ago value to SEK12.07 billion ($1.42 billion). The company’s EPS has increased 89.1% year-over-year to SEK4.35. VLVLY has gained 58.5% over the past year and 8.2% year-to-date.

VLVLY has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

VLVLY has a B grade of B for Growth, Value, Stability and Quality. It is ranked #3 in the Auto & Vehicle Manufacturers industry.

Click here to view additional VLVLY Ratings for Momentum and Sentiment.

Click here to check out our Automotive Industry Report for 2021

Cummins Inc. (CMI)

CMI is a global power leader in the production and distribution of diesel and natural gas engines, electric and hybrid powertrains, and related components. The company operates through five segments: Engine, Distribution, Components, Power Systems, and New Power. CMI is based in Columbus, Indiana.

On May 24, CMI partnered with Iberdrola, S.A. (IBDRY) to build the world’s largest electrolyzer plants to produce green hydrogen in Spain. This partnership should allow CMI to strengthen its position in the clean energy industry.

Also in May,  CMI announced the addition of  a natural gas-powered generator set to its product offerings. Amid the growing popularity of renewable energy, this should attract significant customer interest.

CMI’s net sales increased 21.6% year-over-year to $6.09 billion in the fiscal first quarter, ended April 4. Its operating profit grew 27.8% from its  year-ago value to $810 million, while its net income improved 18% year-over-year to $603 million. The company’s EPS has increased 19.4% year-over-year to $4.07.

Analysts expect CMI’s revenues to increase 21.9% year-over-year to $24.15 billion in the current year. A $16.14 consensus EPS estimate for the current year represents  a 33.8% rise versus  the last year. Also,  CMI surpassed the Street’s EPS estimates in each of the trailing four quarters. Shares of CMI have gained 38% over the past year, and 4.8% year-to-date.

It is no surprise that CMI has an overall rating of A, which equates to Strong Buy in our proprietary POWR Ratings system. The stock also has a B grade for Sentiment and Quality. Among the 84 stocks in the Industrial – Machinery industry, CMI is ranked #11.

To see additional CMI Ratings for Growth, Value, Stability and Momentum, click here.

Click here to check out our Industrial Sector Report for 2021

PACCAR Inc (PCAR)

PCAR is a global technology leader in design, manufacture and distribution of light-, medium-, and heavy-duty commercial trucks. The Bloomfield Hills, Michigan company operates through three segments: truck, parts, and financial services. PACCAR Global sells its products in more than 100 countries.

On April 6, PCAR formed  a strategic partnership with Romeo Power, Inc. (RMO). In the partnership,  PCAR will purchase Romeo Power’s battery packs and battery management software for heavy-duty battery electric vehicles. The arrangement  should enhance PCAR’s zero emissions product offerings and should significantly contribute to the company’s revenues.

PCAR’s net sales increased 13.2% year-over-year to $5.85 billion in its  fiscal first quarter, ended March 31. Its net income improved 30.8% year-over-year to $470.1 million over the period. The company’s EPS increased 31.1% year-over-year to $1.35.

A $5.51 billion consensus revenue estimate for the fiscal second quarter ending June 2021 indicates a 91.6% improvement from the same period last year. Analysts expect the company’s EPS to be  $1.39 for the  current quarter, indicating a 223.3% rise year-over-year. Moreover, PCAR surpassed the Street’s EPS estimates in three of the trailing four quarters. PCAR has gained 17.4% over the past year and 3.1% over the past six months to close yesterday’s trading session at $88.48.

PCAR has an overall B rating, which equates to Buy in our proprietary rating system. PCAR also has a B grade for Growth. It is ranked #20 in the Auto & Vehicle Manufacturers industry.

Beyond what we’ve stated above, we have also rated PCAR for Value, Momentum, Sentiment, Quality and Stability. Click here to view all PCAR Ratings.

Click here to check out our Automotive Industry Report for 2021

VLVLY shares were trading at $25.50 per share on Friday afternoon, up $0.02 (+0.08%). Year-to-date, VLVLY has gained 15.58%, versus a 14.69% rise in the benchmark S&P 500 index during the same period.

About the Author: Subhasree Kar

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics. More...

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