Navistar (NAV) Q2 Loss Wider than Expected, Narrows Y/Y - Analyst Blog
Navistar International Corporation NAV reported second-quarter fiscal 2015 (ended Apr 30, 2015) adjusted net loss from continuing operations of 57 cents per share, significantly narrower than adjusted net loss of $1.45 per share recorded in the year-ago quarter. However, loss per share in the reported quarter was significantly wider than the Zacks Consensus Estimate of a loss of 17 cents.
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On a reported basis, Navistar recorded net loss from continuing operations of $64 million or 78 cents per share, significantly narrower than a loss of $297 million or $3.65 per share in the year-ago quarter. The results benefited from continued progress in business operations and momentum in the North American industry.
Navistar’s revenues dropped 1.9% year over year to $2.7 billion in the quarter, missing the Zacks Consensus Estimate of $2.9 billion. However, the top line was favorably impacted by a 38% year-over-year hike in charge outs for Class 6–8 trucks and buses in the U.S and Canada.
Segment Details
Revenues at Navistar’s Truck segment increased 4.1% year over year to $2 billion. The segment recorded a loss from continuing operations of $51 million, considerably narrower than a loss of $129 million in the prior-year quarter. The improvement was driven by higher charge outs, improved product costs and lower charges for adjustments to pre-existing warranties, along with the company’s initiative to reduce overall repair costs.
Revenues at Navistar’s Parts segment decreased 2.7% year over year to $613 million in the reported quarter. The segment registered a profit of $133 million, flat year over year. The profit came on the back of higher revenues and margin improvements in the North American commercial markets, offset by a decrease in export and Blue Diamond Parts’ sales.
Revenues at Navistar’s Global Operations segment plunged 52% to $130 million from $271 million a year ago. The segment recorded a profit of $1 million in the quarter compared with a loss of $162 million a year ago. The year-over-year improvement was primarily driven by one-time non-cash asset impartment charges and lower manufacturing and structural costs due to restructuring and cost-reduction efforts.
Revenues at Navistar’s Financial Services segment increased 5.3% to $60 million from $57 million a year ago. The segment registered a profit of $22 million, down from $24 million in the corresponding quarter of fiscal 2014. The year-over-year decline can be attributed to higher provision for loan losses in Mexico and lower income from inter-company loans.
Financial Position
Navistar had cash and cash equivalents of $583 million as of Apr 30, 2015, up from $497 million as of Oct 31, 2014. As of Apr 30, 2015, notes payable and long-term debt of $5.2 billion was on par with that of Oct 31, 2014.
Net cash used in operations totaled $237 million in the first six months of fiscal 2015 versus $326 million in the same period a year ago. Capital expenditure was $45 million, down from $50 million in the comparable year-ago period.
Guidance
Navistar expects that 2016 will be a strong year for the North American industry and the company intends to take advantage of the favorable market conditions. Navistar forecasts Class 6–8 retail deliveries for fiscal 2015 in the U.S. and Canada in the range of 350,000–380,000 units. The company also expects EBITDA margin run rate in the fiscal to be higher than 8%.
Cash and cash equivalents, along with marketable securities, are expected between $750 million and $850 million by the end of third-quarter fiscal 2015. Adjusted EBITDA in third-quarter fiscal 2015 is anticipated to be in the band of $125–$175 million, excluding pre-existing warranty and one-time items.
Navistar 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 trucks and trailers.
Zacks Rank
Currently, the company carries a Zacks Rank #3 (Hold). Better-ranked automobile stocks include Continental Aktiengesellschaft CTTAY, Wabash National Corp. WNC and Valeo SA VLEEY, all sporting a Zacks Rank #1 (Strong Buy).
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