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Why Shares of Blue Bird Corp. Soared 54% in 2016 and Where It's Going Now

A line of school buses parked along a road with their stop signs out

What happened

Investors were rewarded in 2016 for holding shares of Blue Bird Corp. (NASDAQ: BLBD) , a manufacturer of Type A, C, and D school buses as well as alternative fuel applications (propane- and natural gas-powered buses). Thanks in part to an industrywide recovery in bus sales after those bottomed out in 2011, shares of Blue Bird jumped more than 50% in 2016.

So what

It was a busy year for the company as it improved customer and dealer technician training, expanded dealer service capabilities, increased daily production capacity by more than 50%, and reentered the commercial bus market. In addition, Blue Bird refinanced its $160 million term loan and $75 million revolving line of credit, which is expected to save the company about $4 million in fiscal year 2017 alone. Blue Bird achieved its guidance for full-year sales, adjusted EBITDA, and adjusted free cash flow, with overall unit sales up 2% to 10,616. The company's backlog is also increasing as overall demand improves; the backlog at the end of fiscal 2016 was at 1,200 units, a 12% increase over the prior year.

A line of school buses parked along a road with their stop signs out

Image source: Getty Images.

"Overall, we had a great year at Blue Bird. We successfully launched four, all-new powertrains while delivering solid growth in top-line revenue and Adjusted EBITDA," said Phil Horlock, president and chief executive officer, in a press release. "Our propane-powered bus offering continues to be the undisputed leader in alternative fuels with sales up 33% over the prior year."

Now what

Image showing the estimated number of bus sales through 2019.

Image source: Blue Bird Corp.'s Craig-Hallum Alpha Select Conference presentation, Nov. 16, 2016.

Blue Bird is well positioned to grow its unit sales by 6% to 8% in 2017 thanks to continued industry growth, conquest of major customers, and increasing demand for alternative-fuel-powered buses. One of the biggest potential catalysts for Blue Bird and its stock price is if the adoption of alternative-fuel buses accelerates faster than anticipated. For instance, in its fiscal 2017 first-quarter earnings report, released last week, management noted it was awarded $4.4 million from the Department of Energy to develop a zero-emissions electric-powered school bus with "Vehicle-to-Grid" technology, which enables the bus to return unused electricity back to the power grid.

That DoE award could be the first of many as the company has a first-mover and brand advantage because it's sold roughly six times more alt-fuel buses than all competitors combined since 2010. While this year might not bring investors another 50% gain, there's still plenty of room for top- and bottom-line growth.

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Daniel Miller has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy .

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.

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