Industrials

Navistar Posts Surprise Profit, Reduces Guidance

Paul Ausick

Published: June 7, 2016 9:05 am

Last Updated: January 13, 2020 7:07 am

Navistar International Corp. (NYSE: NAV) reported second-quarter fiscal 2016 results before markets opened Tuesday. The heavy truck and engine maker posted diluted earnings per share (EPS) of $0.05 on revenues of $2.2 billion. In the same period a year ago, Navistar reported a loss of $0.78 on revenue of $2.69 billion. Second-quarter results also compare to the Thomson Reuters consensus estimates for a net loss of $0.16 and $2.18 billion in revenue.

The revenue decline reflects lower volumes in Navistar’s core U.S. and Canadian markets, due to softer industry conditions and the discontinuation of the company’s Blue Diamond Truck (BDT) joint venture in mid-2015, as well as lower engine volumes in Brazil, due to ongoing weak economic conditions in that country. Lower results were partially offset by higher sales in the company’s Parts segment.

EBITDA rose year over year from $85 million to $135 million, and adjusted EBITDA rose from $102 million to $187 million.

Company President and CEO Troy A. Clarke said:

For the first time since we launched our turnaround more than three years ago, Navistar reported a quarterly profit. Our performance this quarter begins to demonstrate the earnings potential of this company. The fact that we earned a profit despite lower Class 8 truck volumes that impacted the entire industry, underscores the tremendous progress we continue to make in managing our costs effectively and improving our operations.

The company revised its full 2016 fiscal year revenue guidance from a prior range of $9.0 billion to $9.5 billion to a new range of $8.2 billion to $8.6 billion. Adjusted EBITDA also was revised downward, from a prior range of $600 million to $650 million to a new range of $550 million to $600 million. The company now expects cost reductions to “well exceed” $200 million and end-of-year manufacturing cash guidance of about $800 million.

Sales of new trucks fell by 25% in the quarter, although the segment’s net loss dropped from $51 million in the year-ago quarter to $23 million. Reduced costs and improved sales of parts drove second-quarter results.

Shares closed up about 6.5% on Monday, at $12.16 in a 52-week range of $5.78 to $26.37. The stock was inactive in Tuesday’s premarket. Thomson Reuters had a consensus analyst price target of $13.46 before results were announced.