Preliminary March truck orders for Class 8, released yesterday by A.C.T., were in line with Bear Stearns’ expectations.
New net orders were 16,500, on the low end of Bear Stearns’ 16,000-18,000 forecast and up 18% year-over-year (vs. up 19% year-over-year in Feb.).
“Quoting activity appears to be strong, though fleets increasingly are asking for -- and, we believe getting -- '09 slots,” Bear Stearns said.
Class 5-7 orders were 13,500, well below Bear Stearns’ 16,000-18,000 forecast) but up 21% year-over-year (vs. up 98% year-over-year in February.).
“Arguably, Class 5-7 orders are a ‘purer’ measure of economically derived demand,” Bear Stearns said. “We believe diesel prices have soared past the high end of many carriers' fuel surcharge indexes, accelerating pressure on carrier profitability and likely weighing on orders for at least the next several months.
“We have been anticipating improved Class 8 orders in the second half of ‘08 -- not due to a back-half macro recovery, but rather into stabilizing freight fundamentals and ahead of the next emissions deadline. But over the last several weeks, two dynamics appear to be developing: (1) We have incrementally less conviction that the fourth-quarter ‘07 year-over-year improvement in freight tonnage is carrying over into the first quarter of ‘08, despite continued strength in ATA tonnage data, based on our channel checks. And ultimately, people buy trucks to move freight. (2) As noted above, we're becoming more concerned that fuel pressures are heightening; cost recoveries appear to be slipping, which squeezes carrier profitability. Historically, there's north of a 60% correlation between carrier profits and Class 8 orders. We think the TLs' first-quarter reports -- out later this month -- will be critical in measuring up the likelihood of monthly Class 8 orders exceeding 25,000 by year-end 2008.”