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Navistar (NAV) Up 1.5% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Navistar (NAV - Free Report) . Shares have added about 1.5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Navistar due for a pullback? Before we dive into how investors and analysts have reacted as 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 Beat Estimates, Revenues Miss

Navistar reported third-quarter fiscal 2018 (ended Jul 31, 2018) adjusted earnings per share of $1.19, beating the Zacks Consensus Estimate of 93 cents. This compares favorably with the prior-year quarter’s earnings of 37 cents per share.

Navistar recorded net income of $170 million compared with $37 million in the prior-year quarter.

The company’s revenues increased 18% year over year to $2.6 billion in the reported quarter. However, revenues missed the Zacks Consensus Estimate of $2.7 billion. This year-over-year improvement was primarily driven by a 26% increase in sales volume of Navistar’s Class 6-8 vehicles in the United States as well as Canada.

Segment Details

During the quarter under review, net sales at Navistar’s Truck segment increased 25% to $1.9 billion. This improvement primarily occurred on the back of higher volume in the company’s core markets, rise in military sales and a shift in model mix.

Net sales at Navistar’s Parts segment were $605 million, witnessing gain of $19 million compared with the same period last year. The company’s results were aided by strong growth of the Fleetrite brand, partly offset by lower U.S. volume and Blue Diamond Parts sales.

Net sales at the company’s Global Operations segment were $89 million, up 6% year over year. Results were aided by higher engine volumes.

Net revenues at Navistar’s Financial Services segment were $65 million, up by $3 million. This improvement was primarily driven by higher average portfolio balances in Mexico and the United States.

Financial Position

Navistar had cash and cash equivalents of $1 billion as of Jul 31, 2018, up from $706 million as of Oct 31, 2017. As of Jul 31, 2018, long-term debt was $3.89 billion, which was almost the same in comparison with that of Oct 31, 2017.

During the reported quarter, capital expenditure totaled $79 million, down from $93 million recorded in the year-ago quarter.

Guidance

Navistar has raised fiscal 2018 guidance, driven by solid industry conditions.  In the fiscal, Navistar projects industry retail deliveries of Class 6-8 trucks and buses in the United States as well as Canada between 390,000 and 410,000 units, up from the previous projection of 380,000-341,000 units.

Further, revenues for fiscal 2018 are expected to be $10.1-$10.4 billion, up from the prior projection of $9.75-$10.25 billion. Adjusted EBITDA is anticipated to be $775-$825 million in comparison with the prior estimation of $725-$775 million. Manufacturing cash at the end of fiscal 2018 is projected at around $1.25 billion, up from the prior projection of $1.2 billion.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 19.65% due to these changes.

VGM Scores

At this time, Navistar has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Navistar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.




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