On Nov 26, 2013, we maintained a Neutral recommendation on Navistar International Corporation (NAV – Analyst Report).
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 cost-control.
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 include Denso Corp. (DNZOY), Tower International, Inc. (TOWR – Snapshot Report) and Gentex Corp. (GNTX – Snapshot Report). All these companies carry a Zacks Rank #1 (Strong Buy).
