Preliminary April Class 5-7 orders released by ACT Research LLC were up year-over-year but were modestly lower than forecasted numbers by Bear Stearns.
Orders were 22,500 in April – lower than Bear Stearns’ forecast of 25,000 to 27,000. Orders were up 28.9% year-over-year in April, compared to year-over-year growth of 82.1% and 2.1% in March and February, respectively. Year-to-date, Class 5-7 orders are up 33.4% year-over-year vs. a 2.7% year-over-year decline during the first four months of 2005.
Bear Stearns said medium-duty truck demand remains “reasonably strong, although expectations had spiked in March that a major pre-buy might occur in that segment, too. Class 5-7 orders tend to be lumpy; we typically view anything over 20,000 as a modest positive. Sequential decline in orders confirms our original thesis.
Given the 43.3% sequential drop in demand in April, our original interpretation of the strong March data — that it likely represented 1-2 OEMs urging their dealers to stock up on 2006 medium-duty trucks in anticipation of sales strength for those vehicles in 2007 — feels more intact.”
Bear Stearns added, “We continue to believe 2006 will be another very strong year from a production standpoint, with the back-half of 2006, in all likelihood, posting record production months. However, monthly orders drive the stocks, and our best sense is that, with Class 8 orders likely to remain under pressure through year-end, it'll be increasingly difficult for the Class 8 names to outperform - particularly given that there are many other segments within industrials for which fundamentals started to reaccelerate in 1Q:06. We also think the market will be even more disappointed when Class 8 orders don’t rebound later this year.”