Navistar rises as analyst ups rating, price target

NEW YORK (AP) -- Navistar shares climbed nearly 10 percent Friday as an analyst upgraded the truck and engine maker and nearly doubled its price target on the progress the business is making on turnaround plans.

THE SPARK: Ann Duignan of J.P. Morgan raised Navistar International Corp. to "Overweight" from "Neutral" and increased its price target to $45 from $23.

On Thursday Navistar promoted its president and chief operating officer to CEO and sounded an optimistic note on its turnaround strategy. Troy Clarke will take over as CEO on April 15 from Lewis Campbell who is also executive chairman. Campbell, temporary CEO since August, will also be leaving the board as Clarke joins it. James Keyes, a board member since 2002, will become non-executive chairman.

Campbell said that Navistar will begin to pick up market share in the second half of the year as it launches new engine models. He also said that the Lisle, Ill., company is on the road back to profitability.

THE ANALYSIS: Duignan said in a client note that the company's management seems to navigate well through the problems the company is dealing with.

As sales slumped last year, Navistar launched a cost-cutting drive and said it would explore selling some of its businesses. It also averted a proxy war with activist investors, including Carl Icahn, by adding board members aligned with management's plans.

Duignan said that Clarke's appointment was "inevitable," but seems to have happened sooner than expected, "likely a sign that the ship has been turned ahead of plan."

While upbeat, the analyst cautioned that there are still risks, including continued market share pressure and warranty costs.

SHARE ACTION: Navistar rose $3.07, or 9.6 percent, to $34.96 in morning trading. It was as high as $36.04 earlier in the session. The stock has traded in a 52-week range of $18.17 to $43.06.