Navistar Q4 Loss Widens, Shares Fall

Shares of Navistar International Corporation (NAV) declined 5.8% to $37.16 on Dec 20, 2013, post the announcement of results for the fourth quarter of fiscal 2013 (ended October 31, 2013). The company recorded adjusted net loss of $145 million or $1.80 per share in the quarter versus $651 million or $9.43 per share in the comparable period a year ago. The loss per share was wider than the Zacks Consensus Estimate of a loss of $1.55 a share.

On a reported basis, Navistar recorded a loss of $154 million or $1.91 per share in the,quarter, against the loss of $2.8 billion or $40.13 per share reported a year ago.

Navistar’s revenues fell 13.5% year over year to $2.75 billion in the quarter, missing the Zacks Consensus Estimate of $2.92 billion. The year-over-year decrease in revenues was due to lower sales volume in all business segments, driven by the weak industry situation and narrowed market share of the company.

Fiscal 2013 Results

Navistar reported a loss of $898 million or $11.17 per share in fiscal 2013, compared to a loss of $3 billion or $43.56 per share in fiscal 2012. Revenues declined 15.1% to $10.8 billion from $12.7 billion in fiscal 2012.

Segment Details

Revenues from Navistar’s North America Truck segment declined 15.9% year over year to $1.72 billion. The segment recorded a loss from continuing operations of $355 million compared with a loss of $396 million in the prior year. The segment’s year-over-year loss was narrower due to reduction in structural and functional cost, partially offset by the non-cash goodwill impairment charges.

Revenues from Navistar’s North America Parts segment dropped 6.3% to $697 million in the quarter. The segment registered a profit of $147 million, compared with $103 million a year ago. The increase was driven by better margins and reduction in structural costs.

Revenues from Navistar’s Global Operations segment declined 18.4% to $427 million. The segment’s loss of $6 million was lower than the loss of $73 million a year ago. The year-over-year drop in loss was driven by higher margins from the South American engine business and benefits from structural cost reduction actions in the prior-year.

Revenues from Navistar’s Financial Services segment dipped 8.3% to $55 million. The segment profits edged up to $17 million from $16 million in the corresponding quarter last year. The increase was driven by reduced operating expenses.

Financial Position

Navistar had cash and cash equivalents of $755 million as of Oct 31, 2013, compared with $1.1 billion as of Oct 31, 2012. Notes payable and long-term debt was $5.1 billion as of Oct 31, 2013, compared with $4.8 billion as of Oct 31, 2012.

Net cash from operations was $100 million in fiscal 2013 versus $610 million a year ago. Capital expenditure was $167 million in fiscal 2013, down from $309 million in the year-ago period.

Guidance

Navistar expects retail sales of Class 8 in U.S. and Canada for the fiscal year 2014 to stand at 220,000 to 230,000. Moreover, the company estimates additional structural cost savings of $175 million in fiscal year 2014. Capital expenditure is projected to be in line with the 2013 level. Further, Navistar anticipates manufacturing cash and marketable securities to be $1–$1.1 billion by the end of the first quarter of fiscal 2014.

Zacks Rank

Warrenville, Illinois-based 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 various trucks and trailers. Currently, the company carries a Zacks Rank #3 (Hold).

Some stocks that are performing well in the industry in which Navistar operates include Tower International, Inc. (TOWR), Gentex Corp. (GNTX) and Lear Corp. (LEA). All these companies carry a Zacks Rank #1 (Strong Buy).

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