Preliminary Class 8 orders released by A.C.T. for May came in at 15,100-down 49% year-over-year but well above Bear Stearns’ forecast of 10,000 to 12,000.
“We won’t know the break-out of export orders until mid-month,” Bear Stearns said in a release. “However, we note that in April, export orders accounted for 33% of net new orders (vs. 36% of net new orders in March). To put those numbers in context, exports were only 11% of net new orders in 2006. Our best sense is that recent strength in export demand might be sustainable near-term due to 2008 emissions regulations in Mexico and Australia.”
Class 5-7 orders for May were 14,700 (vs. Bear Stearns’ 10,000-12,000 forecast), down 36% yyear-over-year (vs. down 40% year-over-year to 12,170 in April).
“We think investors are disregarding weakness in the U.S. truck cycle and buying the “emissions cycle,” and want to own these stocks early for the next pre-buy in the U.S.,” Bear Stearns said. “Additionally, upside first-quarter reports across the truck equipment space have confirmed our view that something has materially ignited international capital goods demand. And when the strength is as pervasive geographically and product-wise as we've seen out of first-quarter earnings -- somewhat analogous to the ‘light switch’ that flipped on domestically around the first quarter of 2004 -- it seems unlikely to cool in just a quarter or two. With U.S. truck demand likely to improve into 2008 ahead of the next EPA emissions deadline, our sense is that momentum could continue to move these stocks higher.”