Class 8 truck orders were 12,420 in January, down 72% year-over-year (vs. down 51% year-over-year in December). Orders were the lowest since December 2002, and the largest year-over-year decline in about 10 years.
“We increasingly had been calling for a sequential downtick in January from December (although it was more than we expected) based on our channel checks that revealed one of the OEMs had been running a dealer stocking program that ended in the first week of January,” Bear Stearns said. “Going forward, we think February and March orders will likely be flat to down sequentially from January as export orders taper off.”
Class 5-7 orders were 16,256, down 37% year-over-year (vs. down 54% year-over-year in December).
“Arguably, Class 5-7 orders are a ‘purer’ measure of economically-derived demand, given that there was a smaller pre-buy in Class 5-7 (albeit we think there was a ‘pre-build’),” Bear Stearns said.
“In ’06, the group’s performance was astonishing -- particularly in the face of weakening truck fundamentals and a highly-visible downturn in Class 8 demand. We continue to believe the commercial vehicle downturn will be deeper and longer than the market expects. But increasingly, it feels like sentiment will afford the truck equipment stocks have a near-term ‘pass.’ As long as the market continues to believe Class 8 will rebound in the second half of ‘07, weak orders near term may have only a modestly negative impact on the group. (For instance, the group has shrugged off January’s weak orders and 4Q misses.) The bigger surprise arguably might be when monthly orders are still below 20,000 this fall.”