What happened

Investors in truck manufacturer PACCAR (NASDAQ:PCAR) said goodbye to a disappointing 2018, after the stock lost 19.% of its value last year, according to data provided by S&P Global Market Intelligence.

It marked an unusual year for the industry because the outlook for 2018 progressively improved. For example, the table below shows some of the leading companies' full-year outlooks for the North American truck market. As you can see, production forecasts were raised across the board.

Full-Year Guidance (in Thousands of Units)

Terminology

Q4 17

Q1 18

Q2 18

Q3 18

Q4 18

Meritor (NYSE:MTOR)

North America heavy duty (class 8)

260-280

280-300

300-310

300-310

308*

PACCAR 

North America class 8 trucks industry retail

235-265

265-285

265-285

280-290

N/A

Navistar (NYSE:NAV)

North America class 8

220-250

235-265

250-280

260-280

277*

Cummins (NYSE:CMI)

Heavy duty NAFTA

266

286

286

286

N/A

Data source: company presentations. *Figures are actual fiscal year numbers.

What's more, the outlook for 2019 is positive. For example, Meritor, Navistar, and Cummins have all given estimates for 2019 that imply growth. So why were stocks in the sector sold off so heavily last year?

The answer probably lies in two factors. First, there is the market's propensity to sell off the sector as peak truck production approaches and then promptly start buying it after the peak has passed. In other words, the more truck-related companies start talking about a little bit better near-term growth, the more analysts start worrying about the peak.

Second, there were fears of a cyclical slowdown in the economy and its impact on the transportation sector. 

So what

Rational long-term investors will just ignore these price movements because they are in the stocks for the long haul. However, that's not to say the outlook for trucking stocks isn't questionable in the mid-term. For example, axle manufacturer Meritor sees North American heavy-duty truck production falling to 250,000 units in 2022 from 320,000 in 2019 as the market normalizes in North America and Europe.

So the outlook for the next few years is for growth to turn negative, but as we've already seen in 2018, the price performance of trucking sector stocks doesn't always correlate with the near-term outlook.

Trucks on a highway

Image source: Getty Images.

Now what

Investors in PACCAR, and the trucking sector in general, will be keenly looking out for indicators on the economy -- the last thing transportation stocks need is a slowing global economy. Meanwhile, the usual market preoccupation with peak trucking production is likely to go on in 2019. History suggests that selling out as peak production passes is a bad idea, so let's see if history is on the sector's side again this year.

Check out the latest Paccar, Navistar, Meritor, and Cummins earnings call transcripts.