Heavy-Duty Truck Orders Crashed 60% Last Month, Neutral Ratings Follow

According to ACT Research, November NAFTA heavy truck industry orders fell to 16.6k units, down 60 percent year-over-year and 44 percent month-over-month.

Cleveland Research’s recent heavy truck research indicated surging inventory, falling used values and weakening freight fundamentals have “materially impacted customers purchasing decisions.”

Declines On The Rise

The experts “suspect order cancellations continued to rise this month.” Medium-duty orders rose 6 percent year-over-year to 18.7k units after declining 2 percent last month. However, they were still down from October’s 22,000 units.

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The report went on to point out Cummins’ heavy truck engine share fell to 30 percent in October from 32 percent last month. Following a 600bp year-over-year decline, the share now stands at its lowest level since 2006, mainly on the back of lower penetration at Daimler and inferior PACCAR market share.

“Daimler penetration rose to 91 percent of builds from 87 percent last month and 85 percent in 3Q as it continues to expand production capacity and fulfill strong demand for its vertically integrated powertrain,” Uhlman explicated. Cummins’ penetration at PACCAR fell to 60 percent in October, down 200bp month-over-month and year-over-year. Meanwhile, PACCAR’s overall market share declined to 24 percent of builds, down from 29 percent in the third quarter of the year, due to poor results at Peterbilt.

Projections And Ratings

Cleveland’s 2016 class 8 build projection now stands at 275k units, and there could be additional risk this forecast “due to deteriorating freight trends” highlighted by the firm’s transport team this week. The experts remain “cautious on the commercial vehicle space in the medium term and believe consensus earnings forecasts for the group remain too high,” the report concluded.

The firm issued Neutral ratings on Cummins, Navistar and PACCAR.

Disclosure: Javier Hasse holds no positions in any of the securities mentioned above.