Navistar continues strong earnings run

Navistar LT.jpg

Navistar has rolled out a series of new products in the last few years and the strong overall economy is helping the once-beleaguered truck maker rebound with another strong performance in its second-quarter earnings, beating Wall Street estimates.

The maker of International trucks posted net income of $55 million in the quarter on revenue of $182 million adjusted EBITDA compared to a net loss of $80 million in the second quarter of 2017. The company said it generated $119 million of operating cash flow and nearly $100 million in manufacturing free cash flow for the trailing 12 months.

Overall revenues in the quarter rose 16% to $2.4 billion due to higher volumes in Class 6-8 trucks and buses in the U.S. Navistar said it has manufacturing capacity to continue to take advantage of the strong truck market, but that supplier concerns could weight on growth.

“We had a great second quarter, delivering stronger than expected results by taking advantage of the robust market conditions," said Troy A. Clarke, Navistar chairman, president & CEO. "The market continues to respond favorably to our new products, especially our LT Series on highway tractor and the 13-liter A26 engine, which helped us capture two points of year-over-year share growth in the Class 8 segment."


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In the second quarter, Navistar launched its final product in the Project Horizon product refresh, the MV Series of medium-duty work trucks at the Work Truck Show in March.

"We expect to see our medium share improve as we ramp up deliveries of our new MV model in the second half, and we are also expanding our bus product portfolio this summer with gasoline and rear-engine models," said Persio Lisboa, Navistar executive vice president and chief operating officer. "Given this and our strong order performance in Q2, we're confident we are on track to hit our 2018 goal of increasing our total Core market share."

Navistar also announced expansion of its ReNEWed remanufactured components business product line-up as well as its Fleetrite private label parts business and launched an electric school bus, the, chargE, which was developed with partner Volkswagen Truck & Bus.

For the year, Navistar said it expects revenues of between $9.75B and $10.25B and forecast Class 6-8 truck and bus retail deliveries to fall between 380,000 and 410,000 units. Class 8 will comprise 250,000 to 280,000 of that total.

"The work we've done in the first half of the year growing Class 8 share, building our backlog and managing costs, combined with strong industry conditions, positions us to deliver an even stronger second half," Clarke said.

The company’s earnings results was met positively by investors, but its shares did not reflect that, opening yesterday at $40.16 and closing at $38.35. It was up just 2 cents in early morning trading today.

“We don’t have a good reason for why shares pulled back following their initial bounce at the open other than perhaps the company describing capacity constraints in the industry related to suppliers, something we had heard from others. We continue to recommend shares with a thesis that remains unchanged based on improving market share in heavy and medium duty, improved procurement from the JV with Volkswagen, further improvements to margins from productivity initiates and the potential for a full takeover by Volkswagen,” said Stifel in a research note.

Stifel noted that Navistar, with its new 13L A26 engine, continues to gain in market share. “The company’s share in the 15L market held steady at about 18% (which management describes as a normalized level) while the company’s share improved in the 13L segment from 3% when the company started launching the new products to 7%-8% currently as a result of the company addressing that segment better with the LT on-highway truck and the A26 engine,” the note said. “The possibility exists that with greater acceptance in the market of the LT and the A26, the company’s share of 13L could equal that of the 15L market.”