What happened

It's proving to be a bizarre year for commercial truck and industrial parts maker Meritor, Inc (NYSE:MTOR). The stock soared more than 16% in January, largely on the back of its consensus-busting first-quarter earnings report released right at the end of the month, only to fall 10.2% in February, according to data from S&P Global Market Intelligence.

a truck driving toward the horizon

Image source: Getty Images.

While it's not hard to see the reason for the upward move in January -- the midpoint of adjusted full-year earnings per share (EPS) guidance was increased by 13% in the company's results presentation -- the downward move in February is most likely due to a change in sentiment regarding the trucking industry.

As you can see below, most of the major stocks with trucking exposure took a beating in the last month, with the market possibly fretting that the industry had already hit a peak.

DAN Chart

DAN data by YCharts

So what

There's no accounting for market sentiment, but investors can keep an eye on fundamentals, and in this regard, there's little doubt that conditions are improving for the trucking sector. For example, Meritor raised its 2018 global market outlook for truck production across all of its major markets, barring India.

Furthermore, American Trucking Association chief economist Bob Costello recently said, "With the economy strong, the drivers of truck freight solid, and the inventory cycle in favor of motor carriers, I expect freight tonnage to remain robust in the months ahead." - Indeed, North American orders for heavy-duty trucks soared by 76%, according to Reuters.  

Now what

Meritor's stock price and the news flow from the trucking industry moved in the opposite direction during February. If the naysayers are right and current trucking demand marks out a peak, then there could be a case for selling the stock.

However, economies rarely turn on a dime, and the underlying fundamentals driving truck demand growth -- freight demand, China GDP growth, trends in freight industry profitability, etc. -- are all moving in a positive direction. It looks more like a buying opportunity to me.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.