Navistar International Corp. (NYSE: NAV) reported better-than-expected earnings for its fourth quarter but fell short on revenue projections.
The Lisle, Illinois-based truck maker recorded its seventh consecutive full-year improvement in earnings before interest, taxes, depreciation and amortization (EBITDA). Navistar gained 1.3 percentage points of core market share to 18.8% covering heavy-duty (Class 8) and medium-duty (Class 6-7) trucks and buses.
Navistar plans to increase EBITDA to 12% annually by 2024 as part of a plan that includes a goal of 25% core market share.
"Building on the strong gains achieved over the last several years, Navistar has a clear road map in place for sustained growth that will set it apart from the industry," CEO Troy Clarke said in a statement.
Fourth-quarter net income was $102 million, or $1.02 per share, compared with $188 million, or $1.89 per share, in the same period a year ago.
A consensus of analysts projected 96 cents per share in fourth-quarter net income, according to investor site Seeking Alpha.
Net income for fiscal year 2019 was $221 million, or $2.22 per share, compared with $340 million or $3.41 per diluted share, for fiscal 2018. Adjusted net income for fiscal year 2019 increased 29% to $423 million versus $327 million in 2018.
UAW Strike Impact
Adjusted net income for the fourth quarter was $114 million versus $189 million in the same period a year ago. That included a $140 million revenue hit from the United Auto Workers' strike against General Motors Co. (NYSE: GM). Navistar builds medium-duty pickup trucks for GM, which canceled orders for 4,000 units lost to the strike.
Navistar expects to make up about 1,000 units of strike-impacted production for trucks it sells as International models during 2020.
Fourth-quarter revenue was $2.8 billion, down 16% compared to the very strong year-earlier quarter. The fourth quarter of 2018 included the sale of 70% of Navistar Defense. Fiscal-year revenue rose 10% to $11.25 billion, led by a 26% increase in worldwide retail sales of 106,500 units.
Navistar's third consecutive year of core market share growth included an increase in school bus market share to an industry-leading 35.8%. Class 6-7 medium-duty market share rose 3.7 percentage points to 27%. Class 8 market share grew six-tenths of a point to 14.1%.
Additional Production Cuts
"We are taking actions to adjust our business to current market conditions, including reducing production rates and SG&A expenses while restructuring our global and export operations," Clarke said.
After reducing production 15% at plants in Springfield, Ohio, and Escobedo, Mexico, earlier this year, Navistar in November reduced production an additional 10%, canceling the second shift in Escobedo. Overall production rates are now 25% lower at both plants. A spokeswoman could not immediately tie the lower production to the number of workers laid off.
For 2020, Navistar predicts industry retail deliveries of Class 6-8 trucks and buses in the United States and Canada in the range of 335,000 to 365,000 units, with Class 8 retail deliveries between 210,000 and 240,000 units.
It projects revenues in the range of $9.25 billion to $9.75 billion, with adjusted EBITDA in the range of $700 million to $750 million.
"With a proven track record of managing costs and improving operating results, Navistar is in a much better position than in the past to do well even during cyclical downturns," Clarke said.
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