Navistar Misses Badly

Zacks

Navistar International Corporation (NAV) reported a loss of $137 million or $1.99 per share (excluding special items) in the second quarter of 2012 ended on April 30, 2012, in sharp contrast to a profit of $102 million or $1.30 per share recorded in the corresponding quarter of last year and the Zacks Consensus Estimate of a profit of 67 cents per share.

Navistar also recorded a manufacturing loss of $156 million in the reported quarter compared to a profit of $168 million. Revenues went down 2.9% to $3.3 billion from $3.4 billion. It was lower than the Zacks Consensus Estimate of $3.6 billion. The decline in revenues was attributable to decrease in sales in engine and part segments, which were partially offset by higher sales in the truck segment.

Segment Details

Truck: Revenues from the segment inched up 4% to $2.4 billion. The hike in revenues was due to increase in sales in the traditional and South American markets. However, the revenue growth was partially offset by a decline in military sales along with shifts in military product mix.

Meanwhile, it recorded a loss of $89 million compared to $92 million profit in the second quarter of 2011. The decline in profits was attributable to higher commodity and fuel prices, asset impairment charges of $28 million, warranty costs of $24 million and unfavorable shifts in military product mix.

Engine: Revenues from the segment went down 16% to $440 million in the reported quarter driven by low sales volume in South America and pre-purchase of pre-Euro V emission engines in the prior quarters. The segment recorded a loss of $108 million (which included $78 million in warranty costs for 2010 emission standard engines) compared to a profit of $2 million in the corresponding quarter last year.

Parts: Revenues in the segment were $462 million, 10% down from the second quarter of last year. Profits in the segment declined 45% to $41 million from $74 million in the corresponding quarter last year. The lower profits was due to decline in military sales, shifts in military order mix along with asset impairment charges of $10 million.

Financial Services: Revenues in the segment slipped 25% to $43 million. Profits in the segments went down 35% to $26 million compared to $40 million in the second quarter last year.

Financial Position

Navistar had cash and cash equivalents of $400 million as of April 30, 2012, a decrease from $539 million as of October 31, 2011. Total debt was $4.50 billion as of April 30, 2012 compared with $4.86 billion as of October 31, 2011.

In the quarter, Navistar’s net cash flow from operations was $49 million compared to $226 million in the year-ago quarter. Capital expenditures declined to $176 million from $185 million in corresponding quarter last year.

Navistar International Corporation is based in Warrenville, Illinois. It manufactures and sells commercial trucks, mid-range diesel engines, buses, military vehicles and chassis for motor homes and step-vans. It also provides service parts for various trucks and trailer.The company is one of the largest truck producers after Daimler AG (DDAIF) and PACCAR Inc. (PCAR). Currently, it retains a Zacks #5 Rank on its shares, which translates into a short-term Strong Sell rating.

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