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Navistar to Face $140M Revenue Loss From UAW's Strike at GM

Zacks Equity Research

Navistar International Corporation NAV recently announced that the United Auto Workers’ (“UAW”) six-week strike at General Motors GM has affected the company's potential to deliver about 5,000 vehicles to customers during fourth-quarter fiscal 2019. As a result of the lost production, Navistar expects 2019 revenues and adjusted EBITDA to be hit by $140 million and $15 million, respectively.

Navistar has a long-term agreement with General Motors to assemble Class 4-5 medium-duty commercial vehicles and manufacture the cutaway model of GM's G Van at its Springfield truck assembly plant. However, the UAW strike caused production shutdown at GM facilities and affiliated suppliers, affecting the delivery of certain components to the truck assembly plant.

Subsequent to the strike, Navistar halted production of GM-branded vehicles and its own commercial trucks at the Springfield plant on Sep 23, 2019, which in turn affected roughly 1,500 plant workers and the delivery of 5,000 vehicles to customers, approximately. Nevertheless, Navistar recommenced production at the plant on Nov 4, 2019.

Notably, Navistar’s shares have rallied 36.5% in the past three months compared with 14.1% growth recorded by the industry.

Net sales in Navistar’s Truck segment rose 25% year over year to $2.4 billion in third-quarter fiscal 2019. The rise was mainly aided by increased sales of both Mexico and Class 4-5 trucks manufactured for General Motors.

Higher volumes of Navistar’s core truck, bus and parts businesses have been generating positive free cash flow. The improved free cash flow strengthens the company’s balance sheet by offloading debts and interest expenses. As of Jul 31, 2019, the company had cash and cash equivalents of $1,160 million. A steady cash flow growth in 2019 will further strengthen its balance sheet and enhance shareholder value.

Zacks Rank & Stocks to Consider

Currently, Navistar has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Auto-Tires-Trucks sector are Spartan Motors, Inc. SPAR and SPX Corporation SPXC, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Spartan Motors has an estimated earnings growth rate of 85.4% for the current year. The company’s shares have surged 115.2% in a year’s time.

SPX has an expected earnings growth rate of 23.2% for 2019. The company’s shares have surged 59.9% in the past year.

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General Motors Company (GM) : Free Stock Analysis Report
 
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