On Thursday, Blue Bird Corp (NASDAQ:BLBD) stock, a manufacturer of school buses, was downgraded by Roth/MKM from Buy to Neutral. The new price target set for the company's shares is $48.00, indicating a shift in expectations by the analyst firm. The downgrade was prompted by concerns over continued inefficiencies at the Environmental Protection Agency (EPA) in dispersing Electric Vehicle School Bus (EVSB) funding, which could impact Blue Bird's growth prospects.
The analyst from Roth/MKM expressed caution due to recent channel checks, which suggest that the EPA's slow pace in allocating EVSB funds may affect companies like Blue Bird that are involved in the production of electric vehicles. This situation, coupled with recent leadership changes at Blue Bird, has contributed to the decision to reassess the stock's rating.
Despite these concerns, the analyst acknowledged the competence of Blue Bird's CEO, Phil Horlock, stating that the company is expected to remain well-managed under his leadership. However, the current uncertainties have led to the decision to adopt a wait-and-see approach regarding the company's stock, specifically looking for improved growth visibility in the EVSB segment.
The downgrade reflects a more conservative stance from Roth/MKM as they observe how Blue Bird navigates the challenges posed by external factors such as the EPA's funding distribution process. Investors are advised to note this change in rating, which is based on the anticipation of potential hurdles the company may face in the near term.
In other recent news, Amentum has announced its future board of directors following the impending merger with Jacobs™ Critical Mission Solutions and Cyber and Intelligence businesses. The merger is set to close soon, with the board including industry and business leaders such as Steven J. Demetriou, John Heller, and General Vincent K. Brooks. Following the merger, Amentum is expected to become a global leader in advanced engineering and technology solutions, employing over 53,000 people across 80 countries.
In separate news, Blue Bird Corporation has seen significant developments. The company's president, Britton Smith, resigned for personal reasons, with CEO Phil Horlock assuming the additional role. This leadership transition coincides with Blue Bird's record-setting fiscal 2024 third-quarter earnings, indicating a substantial increase in profitability. The company also reported a significant growth in net orders for buses, including a surge in electric bus sales, equating to approximately $775 million in potential revenue.
Furthermore, Blue Bird is investing in capacity expansion, supported by an $80 million grant from the Department of Energy. This will allow for the production of up to 14,000 buses annually and the creation of about 400 new jobs. Future projections suggest revenue growth and higher adjusted EBITDA in the upcoming years, with fiscal '24 revenue expected to reach $1.315 billion and adjusted EBITDA of $175 million. For fiscal '25, revenue is projected to be between $1.4 billion and $1.5 billion, with adjusted EBITDA of $180 million to $200 million.
InvestingPro Insights
Despite the recent downgrade, Blue Bird Corp (NASDAQ:BLBD) has demonstrated strong financial performance, as evidenced by InvestingPro data. The company's revenue growth of 19.53% over the last twelve months and a robust operating income margin of 10.97% suggest a solid business foundation.
InvestingPro Tips highlight that Blue Bird's net income is expected to grow this year, and analysts predict the company will be profitable. This positive outlook aligns with the company's current profitability over the last twelve months. However, investors should note that the stock has taken a big hit over the last week, with a 1-week price total return of -9.88%, possibly reflecting the market's reaction to the downgrade.
The company's P/E ratio of 15.04 and Price/Book ratio of 10.84 indicate that the stock may be trading at a premium, which could be justified by its strong growth prospects in the electric vehicle school bus segment. This valuation should be considered in light of the potential challenges mentioned in the analyst's downgrade.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Blue Bird Corp, providing a deeper understanding of the company's financial health and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.