On Nov 26, 2013, we maintained a Neutral recommendation on
Navistar International Corporation
Why the Reiteration?
Navistar reported third-quarter fiscal 2013 (ended Jul 31,
2013) loss from continued operations of $237 million or $2.94 per
share compared with income from continued operations of $80
million or $1.16 per share in the year-ago quarter. Reported loss
was also significantly wider than the Zacks Consensus Estimate of
a loss of $1.39 per share.
Sluggish industry demand and reduced market share due to its
transition to clean engine systems as per Environmental
Protection Agency (EPA) regulation continue to hamper Navistar's
revenues and earnings. Moreover, the company has incurred
elevated research, development and tooling costs due to stricter
government regulations on engine emissions, noise and safety
imposed by the EPA and the California Air Resources Board (CARB).
Further, the company faces significant supplier risk.
However, on the positive side, the U.S. government is one of
Navistar's dedicated customers, which provides stability to the
company's sales. Moreover, the company's selling, general and
administrative expenses continue to decline due to effective
Navistar continues to advance joint ventures and acquisitions
that are in alignment with its strategic goals to access global
markets. Moreover, the company recently completed the transition
of its entire heavy-duty Class 8 truck fleet to selective
catalytic reduction (SCR) technology.
Navistar continues to be one of the leading players in the
global truck market. As a result, we continue to recommend its
shares as Neutral.
Other Stocks to Consider
Navistar currently carries a Zacks Rank #4 (Sell). Some stocks
that are performing well in the industry where Navistar operates
Tower International, Inc.
). All these companies carry a Zacks Rank #1 (Strong Buy).
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