Class 8 Truck Orders Fell 23% Last Month; Here's Who It Affects

In a report published Wednesday, Longbow analyst Neil Frohnapple said that class 8 net orders in the North American commercial truck industry declined 23 percent y/y in May.

According to the preliminary reports released by FTR Associates for May, Class 8 net orders totaled 19,714 units. This represents a y/y decline of 23 percent. Sequentially, class 8 orders fell 11 percent, from the figure of about 22K reported in April.

"Overall, FTR noted that Class 8 net orders in the month of May were below expectations as most OEMs posted modest reductions from April and a couple manufacturers experienced an even greater than anticipated drop in the month. Orders are expected to continue to fall through the summer months and FTR expects orders to bottom at ~16k units in the month of July. That said, these softer order levels (including May) should still be sufficient to maintain expected production levels this year (+10%) following the significant order levels in 4Q14 and into early 1Q15," analyst Neil Frohnapple wrote.

In the report Longbow noted the North American heavy- and medium-duty commercial truck exposure (includes aftermarket and ancillary sales) for its covered companies as:

• Rush Enterprises, Inc. RUSHA: 100 percent - Rated Buy
• Navistar International Corp NAV: ~75 percent - Rated Buy
• PACCAR Inc PCAR: ~60 percent - Rated Neutral
• Meritor Inc MTOR: 50-55 percent - Rated Neutral
• Allison Transmission Holdings Inc ALSN: 40-45 percent - Rated Buy
• Cummins Inc. CMI: ~25 percent - Rated Neutral
• WABCO Holdings Inc. WBC: ~15 percent - Rated Neutral

The Buy ratings on Allison, Rush Enterprises and Navistar indicate that they appear poised to deliver growth higher than industry build rates in the coming years, driven primarily by market share gains.

"Class 8 net orders fell slightly below 20k units in the month of May as the market continues to stabilize to more normal patterns following the significantly better than expected levels in 4Q14 and early 1Q15. In addition, heavy-truck orders are expected to continue falling through the seasonally weaker summer months," Frohnapple said.

However, current OEM backlog continues to be robust. This supports FTR Associates' North American Class 8 growth outlook of +10 percent in 2015.