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Navistar (NAV) Up 19.4% Since Earnings Report: Can It Continue?

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About a month has gone by since the last earnings report for Navistar International Corporation (NAV - Free Report) . Shares have added about 19.4% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Navistar  Q3 Earnings & Revenues Surpass Estimates

Navistar’s earnings came in at 37 cents per share in third-quarter fiscal 2017 (ended Jul 31, 2017), comfortably beating the Zacks Consensus Estimate of 28 cents. In the year-ago quarter, the company reported a loss of 42 cents per share.

Navistar recorded a net income of $37 million as against a net loss of $34 million recorded in the prior-year quarter.

Navistar’s revenues increased 6% year over year to $2.21 billion in the reported quarter, thus surpassing the Zacks Consensus Estimate of $2.16 billion. The revenue rise was primarily driven by an increase in truck segment’s sales.

Segment Details

Revenues at Navistar’s Truck segment increased to $1.5 billion, a surge of $136 million from the prior-year period. The improvement was primarily on the back of higher volumes of Class 6-8 trucks and buses in the United States, Canada and Mexico alongside manufacturing ramp-up of GM-branded units at Navistar’s Springfield, OH plant. The segment recorded an income of $7 million.

Revenues at Navistar’s Parts segment were $586 million, a slump of $11 million compared with the year-ago level. This decline was primarily due to low sales from the Blue Diamond Parts (BDP) as well as lower sales from North America. The segment registered an income of $157 million, an increase of $5 million from the preceding year. This upside was courtesy the income generated from the sale of business line and lower intercompany access fees, further partially offset by fall in sales of BDP and the U.S. market.

Revenues at Navistar’s Global Operations segment were $84 million, a mere increase of $1 million from the year-ago quarter. The segment also recorded a $3 million income in the quarter versus a $5 million loss, a year ago. The increase in year-over-year income is mainly owing to lower manufacturing and selling, general and administrative costs plus income related to sale of machine and equipment.

Revenues at Navistar’s Financial Services segment were $62 million in comparison to the previous year’s figure of $60 million. This rally was primarily banking on a higher rise in interest rates in the Mexican portfolio. The segment registered an income of $23 million, a decline of $3 million year over year. The decrease can be attributed to lower interest margins, partly offset by reduction in loan provisions in Mexico.

Financial Position

Navistar had cash and cash equivalents of $911 million as of Jul 31, 2017, up from $804 million as of Oct 31, 2016. As of Jul 31, 2017, long-term debt was $4.3 billion, up from the $4 billion as of Oct 31, 2016.

Net cash outflow in operations totaled $168 million in the first nine months of fiscal 2017 in comparison to cash outflow of $14 million in the year-ago period. Capital expenditure totaled $93 million, up from $83 million, recorded in the first nine months of last fiscal.

Guidance

Navistar continues to project Class 6-8 retail deliveries in the United States and Canada in the range of 305,000-335,000 units for fiscal 2017.

Revenues for fiscal 2017 are still expected to be similar to fiscal 2016 level. Adjusted EBITDA is anticipated to be higher than last year’s tally. Manufacturing cash at fiscal 2017-end is projected to be around $1 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There has been one revisions higher for the current quarter.

Navistar International Corporation Price and Consensus

VGM Scores

At this time, Navistar's stock has a subpar Growth Score of D. However, its Momentum is doing a lot better with an A. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

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

The company's stock is suitable solely for momentum investors based on our style scores.

Outlook

Estimates have been trending upward for the stock. The magnitude of these revisions also looks promising. It comes with little surprise that the stock has a Zacks Rank #2 (Buy).




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