Navistar International Corp. posted higher fourth-quarter and full-year sales and profits and forecast strong growth in 2019, closing the door on past mistakes.
The Lisle, Ill., truck manufacturer said it expects that growth to continue into next year and beyond.
Led by a 45 percent increase of sales of its buses and Class 6 through 8 heavy-duty trucks, net income reached $188 million in the August-October period of fiscal 2018, a 39 percent gain from the same period a year earlier, the company reported Tuesday.
Quarterly revenue rose 27 percent to $3.3 billion.
Full-year net income also increased. Fiscal 2018 net income was $340 million compared with $30 million in fiscal 2017. Revenue for the year was up 9.6 percent to $10.25 billion compared with $8.57 billion in fiscal 2017.
Navistar generated $307 million of manufacturing free cash flow in 2018. It expects to use its excess cash to continue to pay off part of its large debt.
The company said it expects growth to continue next year and beyond as supplier constraints ease, although it said a robust backlog of truck orders will continue to stress its supply chain. More cost savings will be realized from its global joint venture with Traton Group, formerly called Volkswagen Truck & Bus, and sales will grow as it delivers on its sizable list of backorders, the company said.
“2019 is going to be a great year for the industry and a tremendous year for us,” said Troy Clarke, Navistar’s chief executive, in a conference call with investors Tuesday.
The company forecast fiscal 2019 revenue of $10.75 billion to $11.25 billion, which is 4 percent higher than analysts had expected, according to Baird Equity Research.
Next year’s gross profit margin will be slightly higher than 2018’s, Clarke said. The company predicted a gross margin of 19 percent to 19.5 percent in fiscal 2019, compared with 18.9 percent in 2018.
“Our upside is superior to that of the industry,” said Clarke. “We have only begun to regain the market share we lost earlier in this decade.”
Its new product lines, upcoming proprietary powertrains developed with Traton, and opportunities for new parts sales are revving up financial results, the company said.
“After transforming the company, Navistar is on the verge of driving higher volume, profit margins and earnings,” a Tuesday report from Baird Equity Research said. The report also said the possibility of Traton buying Navistar outright was another potential upside.
The company’s market share for Class 8 retail truck sales increased to 17.2 percent in the fourth quarter. For the full year, Navistar’s share of the heavy-duty market was 13.5 percent compared with 11.8 percent in fiscal 2017, according to the company.
Navistar raised its forecast for overall industry retail deliveries of Class 8 tractors in the U.S. and Canada next year to 265,000-295,000. Total Class 6-8 trucks and buses sold will range from 395,000 to 425,000 units, it predicted.
Parts sales at the company increased 1.1 percent for the quarter to $633 million while profits declined 0.6 percent to $156 million. The growth in the company’s private-label parts business meant higher sales but lower profits as the margins on those lines are lower, it said.
Global operations, which are primarily in Brazil, saw an 11.4 percent decrease in sales to $93 million for the fourth quarter compared with $105 million in the year-ago period. Quarterly profits jumped to $4 million compared with $1 million a year ago.
Also on Tuesday, Navistar announced that Gary Horvat would join its new eMobility business group as vice president from Proterra Inc., which makes electric transit buses and charging stations.
The improvements Navistar has made to its operation and product lines over the past five years have established a strong foundation for future growth, CEO Clarke said.
“We are no longer preoccupied with the past,” he said. “We are facing forward, addressing the challenges and opportunities of 2019 and the years to come.”