In The News
Class 8 recovery could be at risk: Analysts
NEW YORK -- North American Class 8 orders in March are in line with low expectations, says leading transport market experts at Bear Stearns, but an anticipated modest recovery in the latter half of 2008 may not be shaping up.
Preliminary class 8 orders were 16,500, up 18 percent y/y in Feb.). Fleets, though, are increasingly asking for (and getting) '09 slots, says the New York-based firm.
Analysts were hoping for some sort of rebound later this year -- not due to a back-half macro recovery -- but rather the start of a pre-buy cycle in advance of the next emissions deadline in 2010, as well as the natural fall peak season.
But Bear Stearns says it's having "incrementally less conviction" that the improvement in freight tonnage over the last six months is carrying over into 2008. Also, there is heightened concern that fuel pressures are affecting cost recoveries, which squeezes carrier profitability.
"Historically, there's north of a 60 percent correlation between carrier profits and Class 8 orders," says the firm in a note to investors.
"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."
Meanwhile, March medium-duty orders were less than forecasted. Class 5-7 orders hit 13,500 versus Bear Stearns' 16 to 18,000 unit projections.
Arguably, says the firm, Class 5-7 orders are a "purer" measure of economically-derived demand.