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Navistar (NAV) Down 7.5% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Navistar (NAV - Free Report) . Shares have lost about 7.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Navistar due for a breakout? 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 Q4 Earnings & Revenue Down Y/Y, View Trimmed

Navistar International Corporation 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.

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.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -144.38% due to these changes.

VGM Scores

Currently, 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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