Class 8 Truck Data Good News For Allison, Negative for Cummins, PACCAR, Navistar, WABCO

Class 8 truck details for May bode well for Allison Transmission Holdings Inc ALSN, but appear negative for Cummins Inc. CMI, PACCAR Inc PCAR, Navistar International Corp NAV and WABCO Holdings Inc. WBC, Barclays’ Robert Wertheimer said in a report.

Order Levels

Order levels remain soft for sleeper trucks, and are better for straight trucks for an annualized total of 182K class 8 truck units versus the current full-year consensus estimate of 235K. Sleeper cab orders were “disproportionately weaker,” declining 46 percent, versus a 31 percent decline for all of Class 8.

“Our thesis that straight truck/vocational will hold up better appears to be playing out with straight truck orders flat. Straight truck builds fell only -10%, versus builds down ~30-35% in the other two categories,” analyst Robert Wertheimer noted.

Builds

Class 8 builds continue to be elevated, with ~21K units in May, annualized to ~251K units for the full year. Build unit per day declined 5 percent m/m. “The OEM's likely believe that high backlogs are strong but getting worked down. We in contrast believe that the market is saturated with trucks based on the weakening build rates,” Wertheimer wrote.

Build Likely To Decline

The analyst expects builds to decline sharply, since demand is expected to fall as “the fleet continues to absorb too many tucks into a weakening freight environment.” Pricing is weakening both at Truck OEMs and at truckers, while inventory was flat m/m at near record levels.

Thesis

“Most truck sales are replacements, and replacement demand for each of the next four years should be around record lows for long haul trucks, in our view,” Wertheimer commented. He added that even if there was a surge in demand, it would likely not be large enough to offset the absence of replacement trucks.

“We expect in-town trucks in heavy class 8 and medium duty, to do relatively better than Class 8 sleeper and expect growth in those segments over the next three years with reductions in inventory to benefit class 8 straight,” the Barclays report added.