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Navistar Temporarily Closes Ohio Plant, Withdraws '20 View

Zacks Equity Research

Navistar International Corporation NAV has suspended production at its truck assembly plant in Springfield, OH, for two weeks as well as withdrew the 2020 guidance in response to disruptions to the company’s supply chain due to the pandemic-led crisis.

On Mar 4, the company reaffirmed its financial and industry guidance for 2020, when it announced results for the first quarter of 2020. It also confirmed that its guidance might require revision, provided there is any change in operations due to the COVID-19 outbreak.

Amid uncertainty surrounding the pandemic, Navistar is now withdrawing its financial and industry guidance for 2020. The company expects that its future financial performance will be impacted but the extent is unclear at this point.

As of Jan 31, 2020, the company stated it had $1 billion of consolidated cash and cash equivalents. Additionally, its Financial Services operations had funding capacity available under the company’s $748 million revolving bank credit facility, as well as access to other sources of funding in the United States and Mexico, which would be used to deal with the losses caused by the production shutdowns.

Notably, the number of confirmed coronavirus cases in the United States has crossed 46,000. Acknowledging the gravity of the crisis, President Trump issued new guidelines to contain the spread of the pandemic. The pandemic is likely to take a severe toll on sales and earnings of automakers in the days to come.

Navistar currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Apart from Navistar, the rapidly-spreading coronavirus pandemic has become a concern for other global auto biggies as well. Companies including Ford F, Cummins CMI, Superior Industries SUP, Oshkosh and PACCAR have also withdrawn their 2020 guidance. Moreover, several automakers have closed their factories and suspended production, while the others plan to change manufacturing processes and cut production levels in their plants, in line with the nationwide campaign addressing the crisis. The pandemic has not only dented consumer sentiment and thwarted vehicle demand but also distorted the supply-chain balance globally.

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