Preliminary Class 8 truck orders for January, released by A.C.T. today, were 11,000-lower than Bear Stearns' forecast of the "mid-teens" and down 75% year-over-year (vs. down 51% year-over-year to 18,759 in December). Those numbers mark lowest order in-take since November 2002.
"We won't know the break-out of export orders until mid-month," Bear Stearns said in a release. "However, we increasingly had been calling for a sequential downtick in January from December (although it was more than we expected) following channel check comments that one of the OEMs had been running a dealer stocking program that ended in the first week of January. We also anticipate that export orders will subside in coming months as the channel is filled. Accordingly, we think February and March orders will be flat to down sequentially from January.
"Class 5-7 orders for January were inline with expectations at 14,100 (vs. our 14,000-16,000 forecast), down 46% year-over-year (vs. down 53% to 10,218 in December).
"We continue to believe investors greatly underestimate the magnitude of the '05/'06 pre-buy. The average age of the public TL fleet declined from roughly 28 months in '02 to 17 months at year-end '05. Conservatively, we project it declined to 14 months at year-end '06. There have been no other secular changes of which we're aware in the end market that would drive a secular decline in fleet ages.
"In 2006, the group's performance was astonishing-particularly in the face of weakening truck fundamentals and a highly-visible downturn in Class 8 demand. We've struggled with the disconnect between the end market and the OEMs for some time. We continue to believe the commercial vehicle downturn will be deeper and longer than the market expects. But increasingly, it feels like the truck equipment stocks have a 'free pass.' As long as the market continues to believe Class 8 will rebound in the second half of 2007, weak orders near term may have only a modestly negative impact on the group."