Paccar (PCAR) will likely benefit from increasing demand in the truck market in 2026, BofA Securities said Tuesday in a note to clients.

BofA upgraded the company to buy from neutral and lifted its price target to $121.50 from $116.

Paccar shares underperformed last year due to price versus cost concerns as well as a production downturn in the truck market, the investment firm said.

BofA said that machinery end markets are seeing a supply/demand imbalance, with too much equipment amid slowing demand, but it expects trucks to be the first segment to come into balance.

"While pricing risks likely linger in 1H, the story for the Machinery sector in 2025 is who can grow in 2026? We expect truck green shoots to emerge in '25 to provide visibility to grow in '26," the note said.

Paccar is "one of the few OEMs in our sector likely to report a new peak EPS next year," BofA said.

Price: 110.11, Change: +1.95, Percent Change: +1.80