Preliminary Truck Orders | July NA Class 8 Net Orders 16,000 Units, Down 5% MoM & Up 45% YoY - JP Morgan

ACT Research released preliminary NA truck net orders for July 2023. Class 8 net orders were 16,000 units, down 5% MoM and up 45% YoY (on an easy compare). Seasonally adjusted net orders came in at 20,700 units (248,400 SAAR), up 5.5% MoM. July tends to be a seasonally weak month for orders, and order activity was in-line with ACT Research’s expectations. Per ACT, the July data implies Class 8 backlog down by ~10K units MoM to ~165.2K units, almost entirely booked for 2023. Moreover, given very few (~2K) open build slots remain for the year, ACT does not expect a spike in orders until 2024 books are opened meaningfully. The truck and components group has outperformed the broader market YTD (up 28% vs. the S&P 500 up 19%). In our current coverage, truck orders have the largest incremental impact on PCAR, CMI, ALSN (primarily Class 6-7 and Class 8 straight trucks), and ATMU.

Class 8 net orders down 5% MoM. For July, net orders were 16,000 units, down 5% MoM and up 45% YoY. Seasonally adjusted net orders in the month came in at 20,700 units (248,400 SAAR), up 5.5% MoM. We expect production of ~328,000 units in 2023 (up 4% YoY) and ~279,000 units in 2024 (down 15% YoY).

Class 5-7 net orders down 10% MoM. For July, net orders were 16,600 units, down 10% MoM and up 21% YoY. Seasonally adjusted net orders in the month came in at 19,300 units (231,400 SAAR), up 1% MoM. We expect production of ~261,000 units in 2023 (up 8% YoY) and ~253,000 units in 2024 (down 3% YoY).

Leading indicators mixed. According to our analysis, the ISM New Orders Index tends to be the best leading indicator of future freight trends and truck demand. Specifically, the YoY change in ISM New Orders has historically led the YoY change in the Cass Freight Index (our preferred broad-based indicator of freight trends) by six to nine months. ISM New Orders increased 1.7-pts MoM to 47.3 in July, down 3% YoY and in contraction territory (<50) for the 11th consecutive month. The Cass Freight Index was down 2% MoM and down 5% YoY in June (the latest month available). However, we note that the Cass Freight Index includes rail freight and may be less of an indicator of truckload freight, so we also watch the ATA Total Loads SA Index, which was up 1% MoM and down 2% YoY in June.