Markets
NAV

Navistar to Benefit from Strategic Alliances, Risks Remain

A list of stock prices rising and declining in value
Credit: Shutterstock photo

On Dec 21, we issued an updated research report on Navistar International CorporationNAV . The company has benefitted from the tie-up with Volkswagen AG VLKAY , launch of new products, cost-saving initiatives and increased production at its plants.

The company expects revenues for fiscal 2017 to be similar to fiscal 2016 levels while adjusted EBITDA is anticipated to be higher than fiscal 2016. However, the economic uncertainties prevailing in Brazil have been impacting Navistar's results. The weak delivery guidance for fiscal 2017 and higher costs due to updated emissions standards are also concerns.

Navistar reported fourth-quarter fiscal 2016 (ended Oct 31, 2016) loss from continuing operations of 28 cents per share, as against an adjusted net profit of 36 cents recorded in the year-ago quarter. The Zacks Consensus Estimate for earnings stood at 24 cents per share.

Navistar's revenues fell 17% year over year to $2.06 billion in the quarter, missing the Zacks Consensus Estimate of $2.18 billion. The decline resulted from lower volumes in the company's core U.S. and Canadian markets for Class 6-8 trucks and buses.

Navistar's strategic alliance with Volkswagen Truck & Bus GmbH involves the purchase of a 16.6% equity stake in the former as well as framework agreements for strategic technology and supply collaboration, and a procurement joint venture. The alliance will increase the technology options as well as the range of products and services Navistar offers to its customers.

The company expects the synergies from the strategic technology collaboration and the procurement joint venture. Total synergies over the next five-year time frame are expected to be over $500 million.

Navistar projects Class 6-8 retail deliveries in the U.S. and Canada in the range of 305,000-335,000 units for fiscal 2017, down from 346,400 units recorded in fiscal 2016. Class 8 deliveries are expected in the range of 190,000-220,000 units, down from 226,800 units in fiscal 2015.

Navistar's results have been affected by lower volumes in Brazil, resulting from economic uncertainties. In addition, the company is incurring additional costs due to the ongoing changes in the on-highway emissions standards concerning fuel efficiency, noise and safety.

Price Performance

So far this year, Navistar's shares have gained 249.89%, while the Zacks categorized Auto/Truck Original Equipment industry saw a 5.79% increase. The improvement was driven by benefits from the alliance with Volkswagen, launch of new products, cost-saving initiatives and increased production at its plants.

Zacks Rank & Key Picks

Navistar currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the auto space include America's Car-Mart Inc. CRMT and Rush Enterprises, Inc. RUSHA .

All the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

America's Car-Mart has a long-term expected growth rate of 45.5%.

Rush Enterprises has a long-term expected growth rate of 15%.

Zacks' Top Investment Ideas for Long-Term Profit

How would you like to see our best recommendations to help you find today's most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AMERICAS CAR-MT (CRMT): Free Stock Analysis Report

RUSH ENTRPRS-A (RUSHA): Free Stock Analysis Report

VOLKSWAGEN-ADR (VLKAY): Free Stock Analysis Report

NAVISTAR INTL (NAV): Free Stock Analysis Report

To read this article on Zacks.com click here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

NAV CRMT RUSHA

Other Topics

Stocks

Latest Markets Videos