On January 17, we maintained our Neutral recommendation on
Navistar International Corporation.
), despite its lower earnings in the fourth quarter of fiscal
2012, based on its leading position in the global truck market
and steady stream of revenues from government contracts.
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Navistar incurred a loss of $2.8 billion or $40.13 per share in
the fourth quarter of fiscal 2012 ended October 31, 2012, in
contrast to a profit of $255 million or $3.48 million 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
Following the release of the fourth quarter results, the Zacks
Consensus Estimate for fiscal 2013 declined significantly to a
loss of $2.47 per share from a loss of 86 cents. Meanwhile, the
Zacks Consensus Estimate for fiscal 2014 declined 21.4% to $2.17
per share. The company now has a Zacks Rank #3 (Hold).
Navistar generates a significant amount of revenues from the U.S.
government. This provides consistency and stability to the
revenue stream of the company. The U.S government contributes
about 25% of the company's revenue and the contracts are on
In addition, the company is investing further on different joint
ventures. This will eventually benefit the company along with
expansion in global markets. Further business acquisitions will
also have a favorable impact on the company.
However, 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, the company faces significant supplier risk, owing to
higher dependence on few suppliers of components.
Other Stocks to Look For
Commercial Vehicle Group Inc.
Allison Transmission Holdings, Inc.
) are performing well in the same industry, where Navistar
operates. Commercial Vehicle Group and Oshkosh Corporation are
Zacks Rank #1 (Strong Buy) stocks while Allison Transmission is a
Zacks Rank #2 (Buy) stock.