A month has gone by since the last earnings report for Navistar (NAV). Shares have added about 0.9% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Navistar due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Navistar Beats Q2 Earnings Estimates, Ups FY19 Outlook
Navistar reported adjusted earnings per share of $1.06 in second-quarter fiscal 2019 (ended Apr 30, 2019), which surpassed the Zacks Consensus Estimate of 88 cents. The company reported earnings of 55 cents per share in the prior-year quarter.
During the reported quarter, Navistar recorded net loss of $48 million against net income of $55 million in the prior-year quarter.
The company generated $3 billion in revenues, which beat the Zacks Consensus Estimate of $2.7 billion. The figure also marks 24% rise from the second quarter of fiscal 2018. The year-over-year improvement was driven by strong performance of Navistar’s Class 6-8 trucks and buses in the United States and Canada markets.
Segment in Detail
During the reported quarter, net sales and revenues at Navistar’s Truck segment were $2.3 billion, up 35% from the prior-year quarter figure. The segment recorded net loss of $74 million against net profit of $42 million in the year-ago quarter. This decline resulted from charges related to MaxxForce Engine EGR class action settlement, higher volume and improved pricing.
Net sales and revenues at Navistar’s Parts segment were $579 million, down 4% from the same period of the last fiscal year. The segment’s profit was $144 million, up 9% on a year-over-year basis. Results were aided by higher U.S. margins and lower inter-company access fees, partly offset by lower BDP volume.
Net sales and revenues at the company’s Global Operations declined 10% year over year to $87 million. Its profit was $3 million compared with $1 million recorded in the second quarter of fiscal 2018.
Net sales and revenues at Navistar’s Financial Services segment rose 24% year over year to $78 million. It recorded profit of $32 million compared with $13 million recorded in the prior-year quarter. The segment’s profit improved, owing to higher finance receivable balances in the United States and higher operating lease balances in the United States and Mexico.
Navistar had cash and cash equivalents of $977 million as of Apr 30, 2019, down from $1.32 billion as of Oct 31, 2018. At the end of Apr 30, 2019, long-term debt was $4.6 billion, almost in line with the figure as of Oct 31, 2018.
In the first six months of fiscal 2019, capital expenditure totaled $66 million, up from $53 million recorded in the same period of fiscal 2018.
Fiscal 2019 Guidance
The company raised its guidance for fiscal 2019 on strong industry conditions. During the fiscal year, Navistar projects industry retail deliveries of Class 6-8 trucks and buses in the United States and Canada to be between 425,000 and 445,000 units compared with 395,000-425,000 units mentioned earlier. Further, Class 8 retail deliveries are anticipated to be 290,000-310,000 units compared with previously stated 265,000-295,000 units.
Further, the company’s revenues are expected to be $11.25-$11.75 billion, marking an improvement from $10.75-$11.25 billion stated earlier. Also, adjusted EBITDA is anticipated to be $875-$925 million compared with previously mentioned $850-$900 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 15.62% due to these changes.
Currently, Navistar has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Navistar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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