NEW YORK (AP) -- A Baird analyst said Wednesday that commercial truck maker profits will remain under pressure through the end of the year, as they work through a modest slowdown in truck demand.
David Leiker said in a note to investors that the North American companies are in the process of aligning production with current demand, as orders from emerging markets like Brazil and China continue to fall, while European demand remains steady, but uncertain.
Leiker said he now expects global truck production rates to fall between 5 percent and 10 percent in the second half of this year, down from his previous estimate of a 5 percent drop, as companies cut production of Class 8 trucks, the industry's largest models.
The analyst said that he previously thought that truck maker stocks had already priced in cuts to second-half profit and sales predictions, but was proven wrong when Cummins Inc. on Tuesday slashed its sales prediction for the full year, citing soft demand and slowing economic growth.
Investing in the sector will become a better idea once individual companies start to recover, orders for Class 8 trucks begin to pick up and signs start to appear that Europe's economic problems will be resolved, he said.
Leiker said he remains a long-term buyer of "Outperform"-rated Wabco Holdings Inc., Paccar Inc. and Allison Transmission Holdings Inc. But he cut his ratings for Modine Manufacturing Co., Commercial Vehicle Group Inc. and Meritor Inc. to "Neutral" from "Buy," while also backing his "Neutral" rating for Navistar International Corp.
In morning trading, Wabco shares fell 37 cents to $48.82, Paccar added a penny to $36.29 and Allison dropped 45 cents, or 2.5 percent, to $17.18.
Meanwhile, Modine shed 40 cents, or 6.3 percent, to $6.09; Commercial Vehicle dropped 58cents, or 6.7 percent, to $8.11 and Meritor gave up 13 cents, or 2.7 percent, to $4.71.
Navistar rose 94 cents, or 4.1 percent to $22.85, while Cummins shares fell $1.91, or 2.2 percent, to $84.99.