Navistar Beats but Profits Fall - Analyst Blog

Navistar International Corporation (NAV) posted a decline in profit of $49 million or 68 cents per share in the fourth quarter of its fiscal year ended October 31, 2010 from $86 million or $1.19 per share in the same quarter of prior year. In spite of this, the profit was higher than the Zacks Consensus Estimate of 59 cents per share.

The profit excluded separation and layoff costs of $10 million or 14 cents per share related to the new, four-year contract agreement with the United Auto Workers (UAW) during the quarter. It was negatively affected by lower earnings in the company's Engine and Parts segments on the back of lower volumes in North America and a fall in military sales.

Total segment profit was $146 million, down from $232 million in the year-ago quarter. Revenues during the quarter inched up 2% to $3.37 billion.

For fiscal 2010, the truck maker reported a rise in income to $233 million or $3.19 per share (excluding the separation and layoff costs mentioned above) from $160 million or $2.23 per share (excluding the favorable effects from the settlement of $160 million or $2.23 per share with Ford Motor Co. [F]).

Segment Results

Truck: Segment profit rose hugely to $86 million from $5 million in the previous year quarter. This was attributable to commercial performance and continued material and manufacturing cost improvements.

Engine: The segment reported a loss of $17 million in sharp contrast to a profit of $103 million in the year-ago quarter. This can be ascribed to lower volumes in North America due to the expiration of the company's contract with Ford and ongoing expenses associated with the launch of the company's 2010-emission compliant engines.

Parts: Segment profit declined to $77 million from $124 million due to weak U.S. military sales.

Financial Position

Navistar had cash and cash equivalents of $585 million as of October 31, 2010, a decrease from $1.21 billion in the year-ago period. Long-term debt amounted to $4.87 billion as of the above date, a decline from $5.29 billion a year ago. Long term debt-to-capitalization ratio was 1.25 as of October 31, 2010 compared with 1.49 in the year-ago period.

In fiscal 2010 ended, Navistar had a net cash flow of $1.11 billion from operating activities, a decline from $1.24 million in the same period of the prior year, mainly due to a lower net income. Meanwhile, capital expenditure increased to $234 million from $151 million in fiscal 2009.

Illinois-based Navistar International Corporation, a Zacks #3 Rank (Hold) stock, manufactures and markets commercial trucks, mid-range diesel engines, buses, military vehicles and chassis for motor homes and step-vans, and provides service parts for various trucks and trailers.

The company is one of the largest truck producers after Daimler AG and PACCAR Inc. (PCAR). It expects total truck industry retail sales volume for Class 6-8 trucks and school buses in the U.S. and Canada for the fiscal 2011 to lie in the range of 230,000 to 250,000 units.

 
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