Heavy-Duty Truck Orders Rebound in December

[kscarbel2]

The Wall Street Journal / January 6, 2016

Strong growth in tractor orders from November suggests stability in fleet planning after a steep downturn

Heavy-duty truck orders rebounded in December, in a sign the freight market may be stabilizing after hitting a rough patch last fall, analysts with FTR said Wednesday.

Trucking companies ordered 27,800 big rigs last month, a 70% increase from November, when orders plunged to multiyear lows for that month. December orders were still about 37% lower than they were a year earlier, the freight industry research group said.

Many carriers spent heavily to expand and upgrade their fleets starting in late 2014, anticipating strong customer demand as the economy expanded. But when freight volumes fell below forecasts in recent months, some of those new trucks sat idle. That led to a steep decline in new truck orders, with companies holding off on buying new vehicles until they had a clearer view of future demand.

December’s relatively strong orders for new Class 8 rigs, as the biggest trucks are called, indicate trucking companies are returning to historic norms when it comes to investing in their fleets, said Don Ake, an FTR analyst.

“For first time in a long time we are coming back into a rational, reasonable market,” Mr. Ake said.

However, orders are unlikely to return to the highs reached in late 2014 and early 2015, analysts say. All the major truck manufacturers have announced layoffs, suggesting plans to reduce production. Daimler AG , which owns Freightliner, the top North American brand by sales, said this week it planned to cut jobs at a plant in North Carolina.

Stifel, an investment bank, predicts 250,000 truck orders in 2016, down 24% from last year.

“We view the rebound in orders as a reassuring signal that production should not fall off a cliff … but do not believe the orders indicate that the industry will soon be off to the races again,” Stifel analysts wrote in a research report. “The headwinds facing the industry in 2016 are still significant.”

[hatcity]

lower fuel prices and the forecast of continued low prices helps too.