Sliding like a truck with a broken axle, trailer maker Wabash National
Trucking is the backbone of transportation in the U.S., and the trailers are the sinews supporting it. When trucking slips, it takes trailer companies like Wabash, Lufkin
While revenues for Wabash rose nearly 4% in the fourth quarter, the company's net earnings came in at a $5 million loss, compared with a $20 million net profit last year. It suffered from rising commodity prices in oil, steel, and rubber, along with a weak freight environment.
New air quality regulations went into effect that were more stringent than in the past. Those tougher emissions rules caused the price of trucks to rise markedly. As a result, customers tried to beat their implementation by putting their orders for fleets in last year. While trucks will need to be replaced at some point, that purchase bubble will lead to slower sales, at least in the first half of the new year. Expect trucking companies like PACCAR
Truck orders are expected to rebound in the second half of 2007. Infometrics predicts that after an 11% decrease by the end of the first quarter, sales will start rising, and by the end of 2008 they should have risen by 12% or more.
The American Trucking Association expects total tonnage for all trucking as a percentage of the total freight pool to rise to 69.2% by 2011 and to 69.5% by 2017 from 68.9% in 2005. Trucking's share of total revenue is projected to reach 85.1% by 2017, up from 84.3% last year.
Those are heartening numbers for Wabash, even though they do little to assuage the pain of the latest earnings report. Quote and order activity were weaker than in previous periods, and a backlog of $512 million was actually less than a year ago.
With tough new emissions guidelines and a much-improved freeway system, the need for more heavy trucks will become more acute. But with new higher-capacity trucks comes lower demand for the number of trucks. For companies like Wabash, that's as bad as a tandem trailer truck on a single-lane highway.
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