Volvo truck deliveries: US sales soaring (still)

by SR on May 17, 2012

Sharp contrast at Volvo between soft Europe and roaring US

Volvo truck deliveries in Western Europe (units)

Related stocks: Volvo

  • Conclusion: don’t own anything related to the European truck market! That sounds like a glib comment, but I have heard many analysts and investors defend a recommendation that should be rethought with the hopeful words “this stock is different” (and yes, I have been guilty of that kind of optimism myself). The argument they are giving is that the stock has some “secret sauce” that will make it perform or outperform even when the business environment in which the company operates is deteriorating. Occasionally they are even right, but most of the time the right way to play a sector where the fundamentals are getting worse is simply to avoid that sector. Of course, for an analyst covering a single sector, avoiding that sector is pretty hard to do. You can in theory put sells on everything but that is psychologically very demanding and unless you get your call spot on, it can damage your recommendation. So if somebody comes up to you with a bull story on a European auto/truck parts stock (“it’s a huge beneficiary of the growth in the SCR components market” etc) I would be very, very skeptical. You can do better than that with much less stress.

Volvo truck deliveries % YoY

  • Those numbers in brief Volvo’s global truck deliveries in April 2012 (I mean all trucks, not just the Volvo brand, which accounts for less than half the total) came to 18,497 units, down 4.5% YoY and down 16.2% month-on-month. Western European truck delivery numbers: 5,099 units in April, down 27.3% YoY and down 13.7% MoM. Deliveries in North America ROSE by 39.1% YoY and fell by 6.4% MoM to 4,712 units. Year-to-date in 2012, global deliveries of Volvo trucks are flat at +0.2% YoY, Western European deliveries are down year-to-date by 19.3% YoY, North American deliveries are up 43.8% YoY in cumulative terms and Asian deliveries are up 2.8% YoY year-to-date.

Volvo truck deliveries in North America (units)

  • North American truck buyers apparently know no fear. On the other hand, Volvo’s deliveries in the US and Canada are soaring, which is in line with what I remember from the most recent GVW data. As you can see, sales in 2012 (the red line) are still diverging upwards from sales in 2011 (the blue line), despite 2011 being a very strong year. What’s driving this demand? Volvo management in recent conference calls has said “replacement demand” and “refleeting” is behind this growth but it seems far too strong to be sustainable to me.
  • Truck stock investors, on the other hand, seem terrified. Considering the strength of the market I’m a little surprised that the classic truck parts plays in the US have performed so badly. Over the past 12 months the S&P500 is basically flat, while over the same period Meritor is down 68%, Modine is down 60%, Dana is down 25% and American Axle is down 20%. Only BorgWarner – a long way from being a truck play – is up by a couple of percent. Perhaps, like myself, investors just find it hard to believe that this burst of strength can be sustained for much longer when the economy remains fragile.

Volvo truck deliveries global year-to-date

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