Navistar (NAV) Gains On Truck & Bus Demand Amid High Costs

On Dec 27, we issued an updated research report on Navistar International Corporation (NYSE:NAV) .

Increased demand for Class 6/8 trucks and buses helped Navistar to witness an increase in volumes across the United States and Canada. During fourth-quarter fiscal 2018, robust demand across markets aided the company to grow its market share in every vehicle segment, both on a sequential and year-over-year basis. In fact, Navistar saw a year-over-year increase in revenues and earnings per share in the quarter. Moreover, both earnings and revenues surpassed the respective Zacks Consensus Estimate.

The Lisle, IL-based commercial vehicle manufacturer launched new truck products to cater to increasing demand for new products. In the last fiscal, the LT series and A26 engines helped the company grow its Class 8 heavy market share. A wide product portfolio across its business units will drive the company’s sales. Its lately launched HV and MV series for medium duty and vocational segments are expected to further boost the top line.

Navistar International Corporation Price and Consensus

Navistar expects the same trend witnessed in fiscal 2018 to continue in fiscal 2019 as well, driven by high replacement demand and growth in key economic sectors. In the industry, the company projects retail deliveries of Class 6-8 trucks and buses in the United States, and Canada between 395,000 units and 425,000 units in the current fiscal. Further, it anticipates revenues for fiscal 2019 within $10.75-$11.25 billion and adjusted EBITDA in the range of $850-$900 million.

Higher volumes across all business units strengthened Navistar’s cash flow in fiscal 2018. An improved free cash flow by offloading its debts and interest expenses strengthens the company’s balance sheet, thus generating superior shareholder value. During the last reported quarter, its cash and cash equivalents improved to $1.3 billion from $706 million in the prior fiscal.

However, a continued rise in premium freight and commodity costs, along with product development and engineering expenses are straining the company’s profit margin. Further, Navistar incurs additional costs to develop products that are in sync with the changing emission standards, which further increase product manufacturing costs.

The Zacks Consensus Estimate for fiscal 2019 has moved down 0.3% over the past seven days. The stock has lost 31.9% compared with its industry’s decline of 26.5% in the past three months. It currently holds a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

Some better-ranked stocks in the auto space are Fox Factory Holding Corporation (NASDAQ:FOXF) , Allison Transmission Holdings, Inc. (NYSE:ALSN) and Cooper Tire & Rubber Company (NYSE:CTB) . Fox Factory and Allison Transmission currently sport a Zacks Rank of 1 while Cooper Tire carries a Zacks Rank #2 (Buy).

Fox Factory has an expected long-term growth rate of 5%. Shares of the company have gained 24.6% in the past three months.

Allison Transmission has an expected long-term growth rate of 10%. Shares of the company have increased 7.8% in the past three months.

Cooper Tire has an expected long-term growth rate of 4%. Over the past three months, shares of the company have gained 12.1%.

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