Keep on trucking

Latest data from the Americas Commercial Transportation (ACT) Research Company suggests that the trucks market, which is a key sector for many equipment finance companies, may be in for a bumpy ride.

ACT, which specialists in commercial vehicle (CV) industry data, market analysis and forecasting services, has just published its State of the Industry report covering Classes 5 through 8 vehicles for the North American market. This shows Class 8 net orders were just over 20,500 units in May, while Classes 5-7 posted 19,900 net orders.

Steve Tam, ACT’s vice president-commercial vehicle sector, noted that, amid an economy sending mixed signals, the Class 8 market performed to expectations in May. He added, “While focusing on the order intake of the past may bring feelings of euphoria, a glance into near term expectation is sobering and much more instructive.”

According to Tam, “Historical order placement practices suggest orders for the next four months will be 15% to 20% below average.”

But prospects seem more positive concerning medium duty (MD) vehicles. Tam said, “The MD market in May bucked seasonal expectations, which called for moderate slowing, but the intake resulted in a nearly 11% sequential gain. He continued: “More importantly, it was 22% higher than May 2014, and on a SAAR basis, orders are flowing in at a little over a 230,000 unit pace, very much in line with expectations.”

There is support for this view from GA Advisory and Valuation Services, a division of Great American Group, which has published its inaugural issue of the Transportation Monitor, a bi-annual publication that provides analysis of the transportation industry from a manufacturing and wholesaling perspective, including industry valuation trends.

“Transportation markets have experienced slow but steady growth in the first half of the year,” commented Michael Petruski, executive vice president and general manager of GA Advisory and Valuation Services. “Proliferation of intermodal transportation has been a key factor in the overall growth of the market. Though declining recently, the oil and gas industry continues to be a strong driver of demand in the transportation sector.”

According to GA analysts, Class 8 heavy-duty tractors continue to represent a strong segment in the transportation sector, with 2015 expected to exhibit the highest level of unit production since 2006, which has bolstered the market for used tractors. “We are seeing used Class 8 tractors continuing to maintain high resale values as later-model equipment comes in from fleet operators,” noted Petruski.

The June 2015 Transportation Monitor issue also reports the US aerospace industry, another key sector for equipment finance companies, grew 4% to $228.4 billion in 2014 driven by record orders for new aircraft. GA analysts see continued growth this year based on more efficient aircraft introductions, new requirements for more aircraft to support the projected long-term traffic growth, record capacity utilization rates, and the low cost of financing new aircraft. “While defense spending is projected to decrease over the next decade, healthy commercial demand is expected to drive the aerospace sector,” added Petruski.