Navistar International Corp.’s first fiscal quarter financial performance beat expectations with higher sales, profits and market share driven by a 44 percent increase in truck sales.
Revenue jumped 28 percent to $2.4 billion for the three months ending Jan. 31 compared with $1.9 billion in the same period a year ago, said the Lisle, Ill.-based company during a call with analysts Friday.
A 50 percent increase in core product volume, which represents sales of its Class 6-8 trucks and buses in the U.S. and Canada, drove the higher revenue.
Net income for the maker of the International commercial truck and IC school buses was $11 million for the quarter compared with a net loss of $73 million a year ago.
MARKET SHARE UP
Navistar’s market share grew 1.8 percentage points, led by a 6-point boost in the Class 6 and 7 medium-duty truck market.
The company expects its financial performance for the rest of the year to continue on a positive trend as it works to deliver on the 18 percent growth in order backlogs it has already posted this year. Navistar’s order backlog is the strongest it’s been since 2009, it said.
“For us it’s pedal to the metal,” said Chief Executive Troy Clarke in Friday’s call.
The company added production capacity and has seen its supplier constraints ease, Clarke said.
Clarke expects continued growth in market share as Navistar continues to launch new products, especially in the Class 4 and 5 truck segments.
For the year, the company forecasts its market share to grow to 19 percent, up from its current 18.5 percent. Annual revenue will range from $10.75 billion to $11.25 billion, it said, an increase from its earlier estimate of $10.5 billion to $11 billion.
THUMBS-UP FROM ANALYSTS
Trucking industry analysts applauded the first-quarter results. Baird Equity Research said it expects the strong performance to continue now that Navistar has transformed itself following a financially disastrous decision five years ago to make an engine that did not pass EPA muster.
“Navistar is on the verge of driving higher volume, profit margins and earnings” that could result in more than a doubling of the stock price to $75 a share over the next several years, Baird analysts said.
The possibility of a takeover by shareholder Traton, formerly Volkswagen Truck & Bus, is also a potential positive for the company, according to the analyst report.
Industrywide, Navistar forecasts 2019 sales for its core markets to be in the range of 395,000 to 425,000 units.
The company said its forecast for its gross margin remains unchanged at a range of 19 percent to 19.5 percent for the year. And it did not change its forecast for annual capital expenditure of $150 million.
Trucks sales hit $1.78 billion in the first quarter, up 44 percent from the year-ago period due to higher sales in Navistar’s core markets and an uptick in truck sales in Mexico.
Core market sales jumped 50 percent to 18,900 in the quarter, compared with sales of 12,600 in the year-ago period.
Despite the boost, Baird analysts noted that the company maintained its 2019 Class 8 retail deliveries guidance of 265,000 to 295,000 units, which would be a 1.1 percent year-over-year increase.
While parts sales dipped 3.5 percent to $546 million in the first quarter, profits grew 5 percent to $144 million. The company attributed the revenue decrease to lower Blue Diamond Parts sales and its adoption of a new revenue-recognition standard.
Earlier this week, Navistar announced a service partnership agreement with Love’s Travel Stops, which it expects will help speed up repair times and support parts sales.
Higher interest rates and larger average portfolio balances in the U.S. and Mexico pushed revenue for Navistar’s financial services group to $74 million in the first quarter. Quarterly profits for the group grew 55 percent to $31 million.
Navistar ended its first quarter with $1.24 billion in cash and easily liquidated short-term securities. In January, the company’s debt rating was upgraded one step to B from B- by Standard & Poors, reflecting the company’s financial strength.
“This is a strong market and we think it’s going to continue for a while,” Clarke said.