Navistar Beats Fourth Quarter Earnings on Stronger Truck Sales

Dec.28.09 | About: Navistar International (NAV)

Navistar International Corporation (NYSE:NAV) showed a profit of $128 million or $1.77 per share, before special items, for the fourth quarter of fiscal 2009 ended Oct 31, 2009. With this, the truck maker exceeded the Zacks Consensus Estimate of $1.53 per share. The company has also fared well compared to the year-ago profit of $42 million or 56 cents per share, before special items.

Navistar credited the improvement in profit to the recouped commercial truck volume and sustained military sales. Nevertheless, total sales of $3.3 billion during the quarter were lower than the year-ago level by 15%.

For fiscal 2009, Navistar revealed a net income (before special items) of $205 million or $2.86 per share, compared to $528 million or $7.21 per share in the previous fiscal. This was better then the Zacks Consensus Estimate of $2.38 per share. Sales dipped 21% to $11.6 billion.

Segment Performance

Truck: Segment profit declined to $147 million for fiscal 2009 from $805 million in fiscal 2008. This was attributable to decreased U.S. military sales, lower volumes in traditional markets and higher material costs. However, the company has increased its market share for Class 8 heavy duty vehicles by 6 percentage points on a year-over-year basis.

Engine: Despite lower volume, segment profit improved significantly to $253 million from $29 million (before special items) in fiscal 2008. The segment benefited from improved shipments in the reported quarter in the Truck segment.

Parts: Segment profit increased a staggering 72% to $436 million, driven by the company’s ability to expand into adjacent markets – primarily the military – without any significant investment in product development or distribution infrastructure.

Financial Services: Despite the challenging credit market, segment profit was $40 million in sharp contrast to a segment loss of $24 million in fiscal 2008. The impact of declining portfolio balances was offset by higher earnings from increased interest rates and fees charged to dealers, retail customers and manufacturing operations.

Financial Position

Navistar had cash and cash equivalents of $1.2 billion as on Oct 31, 2009. Long-term debt amounted to $5.4 billion as on that date. The company had a shareholder deficit of $1.8 billion as of the same period.

In fiscal 2009, Navistar had a net cash flow of $1.2 billion from operating activities. Meanwhile, capital expenditure reduced to $151 million.

Navistar International Corporation is a designer and manufacturer of diesel engines for the pickup truck, van, and sport utility vehicle markets. The company also provides retail, wholesale and lease financing of its trucks.

Since the earnings release reflecting the company’s improved results, shares of Navistar have gradually risen to more than 14% to a three-month high of $40.62 on Thursday, Dec 24, on the New York Stock Exchange. However, we continue to recommend the shares of the company as Neutral.