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Why Is Navistar (NAV) Up 5.4% Since Last Earnings Report?

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It has been about a month since the last earnings report for Navistar (NAV - Free Report) . Shares have added about 5.4% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Navistar Beats Q2 Earnings Estimates, Ups FY19 Outlook

Navistar reported adjusted earnings per share of $1.06 in second-quarter fiscal 2019 (ended Apr 30, 2019), which surpassed the Zacks Consensus Estimate of 88 cents. The company reported earnings of 55 cents per share in the prior-year quarter.

During the reported quarter, Navistar recorded net loss of $48 million against net income of $55 million in the prior-year quarter.

The company generated $3 billion in revenues, which beat the Zacks Consensus Estimate of $2.7 billion. The figure also marks 24% rise from the second quarter of fiscal 2018. The year-over-year improvement was driven by strong performance of Navistar’s Class 6-8 trucks and buses in the United States and Canada markets.

Segment in Detail

During the reported quarter, net sales and revenues at Navistar’s Truck segment were $2.3 billion, up 35% from the prior-year quarter figure. The segment recorded net loss of $74 million against net profit of $42 million in the year-ago quarter. This decline resulted from charges related to MaxxForce Engine EGR class action settlement, higher volume and improved pricing.

Net sales and revenues at Navistar’s Parts segment were $579 million, down 4% from the same period of the last fiscal year. The segment’s profit was $144 million, up 9% on a year-over-year basis. Results were aided by higher U.S. margins and lower inter-company access fees, partly offset by lower BDP volume.

Net sales and revenues at the company’s Global Operations declined 10% year over year to $87 million. Its profit was $3 million compared with $1 million recorded in the second quarter of fiscal 2018.

Net sales and revenues at Navistar’s Financial Services segment rose 24% year over year to $78 million. It recorded profit of $32 million compared with $13 million recorded in the prior-year quarter. The segment’s profit improved, owing to higher finance receivable balances in the United States and higher operating lease balances in the United States and Mexico.

Financial Position

Navistar had cash and cash equivalents of $977 million as of Apr 30, 2019, down from $1.32 billion as of Oct 31, 2018. At the end of Apr 30, 2019, long-term debt was $4.6 billion, almost in line with the figure as of Oct 31, 2018.

In the first six months of fiscal 2019, capital expenditure totaled $66 million, up from $53 million recorded in the same period of fiscal 2018.

Fiscal 2019 Guidance

The company raised its guidance for fiscal 2019 on strong industry conditions. During the fiscal year, Navistar projects industry retail deliveries of Class 6-8 trucks and buses in the United States and Canada to be between 425,000 and 445,000 units compared with 395,000-425,000 units mentioned earlier. Further, Class 8 retail deliveries are anticipated to be 290,000-310,000 units compared with previously stated 265,000-295,000 units.

Further, the company’s revenues are expected to be $11.25-$11.75 billion, marking an improvement from $10.75-$11.25 billion stated earlier. Also, adjusted EBITDA is anticipated to be $875-$925 million compared with previously mentioned $850-$900 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -9.53% due to these changes.

VGM Scores

At this time, Navistar has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

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

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Navistar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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