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Navistar (NAV) Down 5.9% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
Blackstone Group (BX) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

A month has gone by since the last earnings report for Navistar (NAV). Shares have lost about 5.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Navistar due for a breakout? 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 Q1 Earnings Meet Estimates, Revenues Beat

Navistar reported earnings per share of 11 cents in first-quarter fiscal 2019 (ended Jan 31, 2019), in line with the Zacks Consensus Estimate. The company reported loss of 74 cents per share in the prior-year quarter.

During the reported quarter, Navistar recorded net income of $11 million against net loss of $73 million in the prior-year quarter.

The company generated $2.43 billion in revenues, which beat the Zacks Consensus Estimate of $2.23 billion. The figure also marks 28% rise from the first quarter of fiscal 2018. This year-over-year improvement was primarily driven by a 50% increase in sales volume of Navistar’s Class 6-8 trucks and buses in the United States as well as Canada.

Segment Details

During the reported quarter, net sales and revenues at Navistar’s Truck segment were $1.8 billion, up 44% from the prior-year quarter figure. The segment recorded profit of $90 million against loss of $7 million in the year-ago quarter. This improvement was due to higher volume in the company’s core markets, partly offset by higher material and freight costs and the impact of sales of a majority interest in Navistar Defense.

Net sales and revenues at Navistar’s Parts segment were $548 million, down 4% from the same period of the last fiscal year. The segment’s profit was $144 million, up 5% on a year-over-year basis. Results were aided by higher margins and lower inter-company access fees, partly offset by lower BDP volume and higher freight-related expenses.

Net sales and revenues at the company’s Global Operations declined slightly to $73 million. Its profit was $6 million against loss of $7 million recorded in the first quarter of fiscal 2018. Results were aided by higher volume and cost-reduction benefits.

Net sales and revenues at Navistar’s Financial Services segment rose to $74 million. It recorded profit of $31 million, up 55% year over year. The segment’s profit improved due to higher interest margin from improved funding strategies and income from an inter-company loan. However, this rise was offset by higher depreciation expenses on operating leases.

Financial Position

Navistar had cash and cash equivalents of $1.2 billion as of Jan 31, 2019, down from $1.3 billion as of Oct 31, 2018. At the end of Jan 31, 2019, long-term debt was $4.6 billion, almost in line with the figure as of Oct 31, 2018.

During the reported quarter, capital expenditure totaled $44 million, up from $30 million recorded in first-quarter fiscal 2018.

Fiscal 2019 Guidance

The company reiterated its fiscal 2019 guidance.

Navistar projects industry retail deliveries of Class 6-8 trucks and buses in the United States and Canada to be between 395,000 and 425,000 units in fiscal 2019. Class 8 retail deliveries are anticipated to be 265,000-295,000 units.

Further, the company’s revenues for fiscal 2019 are expected to be $10.75-$11.25 billion while adjusted EBITDA is anticipated to be $850-$900 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. The consensus estimate has shifted 28.12% due to these changes.

VGM Scores

Currently, Navistar has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Navistar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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