Fitch Ratings Services has reaffirmed the long-term issuer
default rating (IDR) on
) and its subsidiary Navistar Financial Corporation (NFC) at
'CCC'. Along with the rating affirmation, Fitch has done away
with the negative outlook on the entity owing to lesser liquidity
problems of the company.
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Navistar had cash and cash equivalents of $ 1.1 billion as of Oct
31, 2012, up from $539 million as of Oct 31, 2011. Cash and
marketable securities was $ 1.6 billion as of Oct 31, 2012, up
from $1.3 billion as of Oct 31, 2011. The agency believes the
cash balance is sufficient to offset the negative free cash flow
resulting from higher capital expenditures due to the
introduction of heavy-duty diesel SCR engines.
The rating agency is concerned about the company's free cash
flow, which may decrease further in the first half of fiscal 2013
due to delays in deliveries arising from the reduction of
emission credits and increase in expenditures on warranties,
non-conformance penalties and pension contributions. In addition,
the situation may further worsen if the industry truck demand
does not improve or the transition in SCR technology gets
In Oct 2012, Navistar had signed a long-term supply deal with
) for SCR engines and emissions technology. The company will be
using Cummins ISX15 engine in International ProStar+ and 9900
models. Though the transition is taking place effectively, the
rating agency is concerned about certain execution risk related
to integration of the technology.
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. The
company now has a Zacks Rank #3 (Hold).
Navistar incurred a loss of $2.8 billion or $40.13 per share in
the fourth quarter of fiscal 2012 ended Oct 31, 2012, in contrast
to a profit of $255 million or $3.48 per share a year ago. The
loss per share was wider than the Zacks Consensus Estimate of a
loss of $1.08 per share.
Revenues declined 24.1% year over year to $3.3 billion in the
quarter but surpassed the Zacks Consensus Estimate of $3.2
billion. The year-over-year decline in revenues was due to lower
Commercial Vehicle Group Inc.
Allison Transmission Holdings, Inc.
) are performing well in the same industry where Navistar
operates. Commercial Vehicle Group is a Zacks Rank #1 (Strong
Buy) stock while Allison Transmission carries a Zacks Rank #2