Truck orders are about to boom, if a new industry update from Stifel is correct. The firm believes that Class 8 orders, which have been strong this year, are about to take off for the remainder of the year as many larger fleets begin ordering larger quantities of vehicles. That has led it to boost its target price ranges for truck equipment manufacturers.
“Throughout 2017, truck equipment orders have been better than expected with the purchasing coming primarily from small/mid-sized fleet and vocational customers. The question in our minds is whether large fleets will order equipment in large quantities this fall; we expect they will, given optimism surrounding electronic logging devices (ELDs), freight volume trends, and especially freight rates,” the firm said. “We believe October-December Class 8 orders in North America will average more than 30,000 units per month, up 60% from the same (depressed) period last year and 30% above the 10-year average level.”
To this point, smaller and mid-sized fleets have driven large portions of the Class 8 orders. Stifel believes economics will help improve large fleet buying in the final three months.
“We believe large fleets will be the biggest contributors to incremental demand this year, following restrained equipment purchases in the prior two years,” Stifel noted. “For best-in-class large fleets, reasons for optimism abound, including improving freight volume, surging spot rates which bode well for contract rate improvements (we see 5%-10% next year), and the impending ELD mandate. Given that outlook, coupled with increasing replacement demand as a result of high production in 2014-2015, we forecast Class 8 production up 12% next year to 280,000 units, and we believe there is more risk to the upside than downside in the near-term.”
In medium duty, Stifle is projecting a 4% increase in Class 5-7 production to 257,000 units in 2018 – that is above the 5% growth expected this year. Trailer demand has been high this year, but Stifel believes that it fall 4% next year to about 280,000 units.
Did you know?
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Stifel is forecasting more growth in orders for Class 8 vehicles at the end of this year and another strong year in 2018. There is currently a slight oversupply of used vehicles, and with another banner year being projected by many in 2018, eventually those trucks will hit the used market, potentially holding down prices for several years to come.
Hammer down everyone!