Preliminary Class 8 net orders released by A.C.T. were better than expected at 23,300, according to Bear Stearns.
“Our sense is that much of the upside (vs. our forecast) can be attributed to OEMs increasing their build plans as a result of May's strong production,” Bear Stearns said in a release. “In addition, we believe there were still 1-2 OEMs, who have lagged order intake YTD, that were filling out there '06 production slots.
“We continue to believe that the '05-'06 pre-buy has been larger than might appear on the surface. The average age of the public TL fleet has declined from roughly 28 months in 2002 to 17 months at year-end '05. Conservatively, we project it declining to 14 months by year-end '06. While the '06 ‘precipice’ in orders is turning out to be more gradual than expected, directionally it doesn't change our outlook on '06 and '07.
“How does the date impact the stocks? Monthly orders drive the stocks, and our best sense is that Class 8 orders likely to continue to weaken as the year progresses. As a result, we think it'll be increasingly difficult for the Class 8 names to outperform - particularly as we enter the typical order season in September when we expect order intake to still be weak. We think the market will be even more disappointed when Class 8 orders don't rebound later this year.”