On Mar 14, we downgraded
Navistar International Corporation
) to Underperform based on the supplier risk faced by the company
owing to higher dependence on few suppliers of components and
mounting research and development expenses on the back of
stricter regulations by the government.
Why the Downgrade?
Navistar recorded a loss of $114.0 million or $1.42 per share in
the first quarter of fiscal 2013 (ended Jan 31, 2013), which was
narrower than $144.0 million or $2.06 per share in the year-ago
quarter. Loss per share was also narrower than the Zacks
Consensus Estimate of a loss of $1.63 per share.
Navistar's revenues declined 12.4% year over year to $2.6 billion
in the quarter, missing the Zacks Consensus Estimate of $2.8
billion. The year-over-year decline in revenues was due to
sluggish industry demand and lower market share of the company
due to its transition to clean engine systems as per EPA
Following the release of the first quarter results, the Zacks
Consensus Estimate for 2013 has gone up 6.4% to a loss of $2.50
per share. The Zacks Consensus Estimate for 2014 has also
improved 19.4% to $2.59 per share.
Navistar has to bear the brunt of increased expenditure due to
the investment in research, development and tooling equipment to
design engine products, which will meet the Environmental
Protection Agency (EPA) and the California Air Resources Board
(CARB) emission, noise and safety standards.
In addition, Navistar faces significant supplier risk, owing to
higher dependence on few suppliers of components. Navistar
sources materials and components from third-party suppliers and
some of them are the sole source for a particular supply item.
Other Stocks to Consider
Few stocks that are performing well in the industry where
Navistar operates include
STRATTEC Security Corporation
). Strattec Security and Gentherm are Zacks Rank #1 (Strong Buy)
stocks while Oshkosh carries a Zacks Rank #2 (Buy).
NAVISTAR INTL (NAV): Free Stock Analysis
OSHKOSH CORP (OSK): Free Stock Analysis
STRATTEC SEC CP (STRT): Free Stock Analysis
GENTHERM INC (THRM): Free Stock Analysis
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