Truck orders kept ticking up in January

FTR said preliminary Class 8 net orders for January at a “solid” 21,600 units, according to its data, continuing in the firm’s words a “remarkably consistent trend” that began in October last year.  January 2017 Class 8 orders were 20% better than January 2016, noted Don Ake, FTR’s vice president of commercial vehicles in a statement, adding that after a steady decline in order rates and backlog throughout most of 2016, the market righted itself in the fourth quarter last year.

Currently, Class 8 orders for the past three months now annualize to 248,000 units, Ake said, with backlogs expected to rise for the third straight month. “The order increase will help to boost first quarter [2017] build rates and is more good news for the Class 8 market,” he added, noting that “it is unusual” for January orders to be higher than numbers recorded for fourth quarter months. “This indicates fleets are more confident in market conditions than they were four months ago,” Ake pointed out.

According to ACT Research numbers, North American Class 8 net orders hit a fourteen-month high at 22,200 units in January, rising above both the prevailing order trend and expectations. “This is the time of year when big fleets are in the market scheduling replacement orders for the coming year,” added Kenny Vieth, ACT’s president and senior analyst, in a statement. “This is only the second positive year-over-year comparison in 23 months.”

ACT’s analysis also indicated that North American Class 5-7 medium-duty orders hit an eleven-month high in January, rising 32% year-over-year to 23,000 units. “As the year’s opening stanza is typically one of the weakest in terms of order activity, seasonal adjustment provides a strong boost, pushing the adjusted net order volume to 24,450 units,” noted Vieth. “To put that number into context, January’s seasonally adjusted medium-duty net order total was the best monthly reading in nine years; since February 2008.”

Stifel’s Baudendistel, however, stressed that Class 8 truck orders “aren’t surging by any means” yet continue to look “incrementally better.” He added that recent comment from some truck OEMs regarding their conversations with customers – and from motor carriers directly – indicate “more willingness” by fleets to now commit capital to equipment purchases following a pullback in orders in 2016.

Baudendistel added that Class 8 orders of 22,200 units in January, which are up 4% month-over-month and up 21% year-over-year, were “slightly above” Stifel’s expectation for orders to be roughly flat sequentially, though a 4% uptick in sequential growth “certainly is not outperforming by leaps and bounds,” he stressed, noting that since the Class 8 “order season” began in earnest in October of last year, the industry booked net orders of just 76,933 units, down 14% from the 2015 level.

Yet he stressed that 14% decline now indicates significantly less demand will need to be made up for in the back half of the order season, as it is roughly in line with Stifel’s production outlook, which implies a decline of 13%. “We believe that indicates potential upside to our 2017 outlook, with backlogs low, thus reducing the incentive to secure a production slot early, and inventory representing less of a headwind this year, though still somewhat elevated,” Baudendistel pointed out. For now, however, Stifel is maintaining its 2017 Class 8 production estimate of 200,000 units.

Stifel also noted that medium-duty orders showed even more improvement for January, topping out at 23,000 units, with is a 4% gain month-over-month and 32% year-over-year; the highest level in the last 10 months. “Overall, we believe total [medium-duty] orders for the month should be viewed positively,” Baudendistel said. “While that is not enough to cause us to increase our 2017 estimates, a sign that conditions are pointing in the right direction so far,” he added.

Baudendistel emphasized that “strength” in January medium-duty orders “was a welcome reprieve from recent weakness, following five consecutive months of year-over-year declines to close out 2016,” he said. “That improvement also provides some short-term confirmation to the modest increase we made to our 2017 production estimate to 235,000 units or 4% year-over-year, up from 230,000 units.”