Navistar International Corporation
) is expected to release its fourth quarter 2012 before the
market opens on December 19. The company posted a loss of $1.48
per share in the third quarter of fiscal 2012, ended on July 31,
2012. The loss was wider than the Zacks Consensus Estimate of
$1.39 per share.
In the upcoming quarter, the Zacks Consensus Estimate for the
company is a loss of $1.08 per share, reflecting an annualized
estimated decline of 132.19%.
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With respect to earnings surprise, the company has missed the
Zacks Consensus Estimate in three of the trailing four quarters
and outperformed in the other. With this, the company has
delivered an average earnings surprise of -287.28%, implying that
it has missed the Zacks Consensus Estimate by that measure.
The Zacks Consensus Estimates for full-year 2012 is a loss of
$4.14, implying an estimated year-over-year decline of 178.41%.
The downside potential of the fourth quarter and full year
estimates, essentially a proxy for future earnings surprises, is
about 46.06% and 93.15%, respectively.
Third Quarter Review
Navistar recorded a loss of $86.00 million (excluding an income
tax benefit and costs related to non-conformance penalties) in
the third quarter of fiscal 2012 in sharp contrast to a profit of
$46.00 million in the corresponding quarter of 2011 (excluding
the benefit from income tax valuation allowance and costs related
to restructuring of North American operations).
Revenues declined 6% to $3.32 billion in the quarter, surpassing
the Zacks Consensus Estimate of $3.03 billion. The year-over-year
decline in revenues was due to lower revenues from the company's
Truck and Engine segments in the U.S. and Canada.
Revenues from the Truck segment went down 5% to $2.34 billion,
due to a fall in military sales and traditional volumes. Revenues
from the Engine segment fell 13% to $840.00 million, driven by
lower sales volumes in South America due to pre-purchase of
pre-Euro V emissions engines. Revenues from the Parts segment
climbed 5% to $542.00 million while the same from the Financial
Services segment slipped 12% to $64.00 million.
Estimate Revisions Trend
The Zacks Consensus Estimate for the fourth quarter has remained
stable over the past 30 days. Let us discuss the agreement and
magnitude of estimate revisions.
Agreement of Estimate Revisions
Over the last 60 days, 3 out of 15 analysts covering the stock
have revised the estimates downward for the upcoming quarter
while none moved it upward. Over the last 30 days and last 7
days, none of the analysts covering the stock have revised the
estimates upward or downward for the fourth quarter, implying the
lack of near-term catalysts for the stock.
Over the last 60 days, 1 out of 8 analysts covering the stock has
revised the estimates downward and another moved it upward for
2012. Over the last 30 days and last 7 days, none of the analyst
revised the estimates upward or downward for the year.
Magnitude of Estimate Revisions
Following the third quarter earnings release, estimates for the
fourth quarter and full year 2012 decreased by 6 cents to a loss
of $1.08 and 5 cents to a loss of $4.14, respectively.
Warrenville, Illinois-based Navistar International manufactures
and sells commercial trucks, mid-range diesel engines, buses,
military vehicles and chassis for motor homes and step-vans. It
also provides service parts for various trucks and trailers.
Navistar benefits from the leading market position in the global
truck market beside
). The company also enjoys a steady stream of revenues from
government contracts. However, we are concerned about the
significant supplier risk, owing to higher dependence on few
suppliers of components together with its mounting research and
development expenses on the back of stricter regulations by the
Currently, Navistar retains a Zacks #3 Rank, which translates
into a short-term (1 to 3 months) Hold rating. This is also
reflected in our long-term (more than 6 months) Neutral
recommendation on the stock.