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Navistar's (NAV) Q4 Earnings Surpass Estimates, Down Y/Y

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Navistar International Corporation NAV recorded net income of $102 million or $1.02 per share in fourth-quarter fiscal 2019 (ended Oct 31, 2019) compared with the prior-year quarter’s $188 million or $1.89 per share.

Adjusted earnings per share for the reported quarter came in at $1.14, which surpassed the Zacks Consensus Estimate of 89 cents. Solid contribution from the Parts segment, aided by improving North American operations, resulted in this outperformance. This comes in lower than the $1.89 per share reported a year ago.

The company generated $2,780 million in revenues, which beat the Zacks Consensus Estimate of $2,775 million. The revenue figure, however, marks a 16% fall from the year-earlier reported figure, which resulted from lower industry demand.

Navistar International Corporation Price, Consensus and EPS Surprise

Navistar International Corporation Price, Consensus and EPS Surprise
Navistar International Corporation Price, Consensus and EPS Surprise

Navistar International Corporation price-consensus-eps-surprise-chart | Navistar International Corporation Quote

Segment in Detail

The Truck segment’s net sales came in at $2.1 billion in the reported quarter, down 19.6% year on year. The segment recorded net profit of $86 million, significantly down from the $197 million reported in the year-ago quarter. The downside primarily resulted from decline in the company's core chargeouts and impact of the sale of a majority interest in the Defense business.

The Parts segment net sales summed $547 million, down 13.6% year over year. The segment’s profit was $161 million, up 3.2% on a year-over-year basis. This upside was aided by improved North American operating results, reflecting the company's growing private label business.

Net sales in the company’s Global Operations were flat year over year at $93 million. It reported a loss of $10 million compared with the profit of $4 million recorded in fourth-quarter fiscal 2018. Rise in restructuring charges, including ceasing production at the company's MWM Argentina engine plant, and restructuring activities in Brazil resulted in this downside.

Net sales in Navistar’s Financial Services segment inched up 1.4% year over year to $71 million. The segment recorded profit of $30 million compared with the year-ago quarter’s $26 million. Its profit improved, aided by lower interest expenses, owing to the payoff of the company's $400-million Term Loan in May 2019.

Financial Position

Navistar had cash and cash equivalents of $1,370 million as of Oct 31, 2019, up from $1,320 billion as of Oct 31, 2018. At the end of the quarter, long-term debt was $4.32 billion, down compared with $4.52 billion as of Oct 31, 2018. The debt-to-capital ratio was 521.66%, as of Oct 31, 2019.

In the year ended fiscal 2019, capital expenditure totaled $134 million, up from the $113 million recorded at the end of fiscal 2018.

Fiscal 2020 Guidance

For fiscal 2020, Navistar projects industry retail deliveries of Class 6-8 trucks, and buses in the United States and Canada to be between 335,000 units and 365,000 units compared with the 435,000 units and 455,000 units mentioned earlier. Further, Class 8 retail deliveries are anticipated in the range of 210,000-240,000 units compared with the previously-projected 295,000-315,000 units.

The company expects revenues in the band of $9.25-$9.75 billion, down from the earlier expectation of $11.25-$11.75 billion. Also, adjusted EBITDA projections are in the range of $700-750 million, showing a downtrend from the prior guidance of $875-$925 million.

Zacks Rank & Stocks to Consider

Navistar currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the Auto-Tires-Trucks sector include Weichai Power Co. WEICY, Spartan Motors, Inc. SPAR and SPX Corporation SPXC. While Weichai Power flaunts a Zacks Rank #1 (Strong Buy), Spartan Motors and SPX carry a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Weichai Power has a projected earnings growth rate of 6.11% for the current year. Its shares have surged 81% over the past year.

Spartan Motors has an estimated earnings growth rate of 85.42% for the ongoing year. The company’s shares have soared 146.6% in a year’s time.

SPX has an expected earnings growth rate of 23.18% for 2019. The stock has appreciated 88.2% in the past year.

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