The Q2 2014 earnings report for Navistar International Corp (NYSE: NAV), a potential peer of light, medium- and heavy-duty truck or engine makers PACCAR Inc (NASDAQ: PCAR) and Cummins Inc (NYSE: CMI), is scheduled to report earnings after the market closes on Thursday. Aside from the Navistar International Corp earnings report, it should be said that PACCAR Inc and Cummins Inc both reported Q1 2014 earnings on April 29th (PCAR reported higher revenues and net income while CMI hit a 52-week high after a beat and raised guidance). However, Navistar International Corp has lost market share since 2012 when US regulators denied approval of a redesigned diesel engine that failed to reduce green house gas levels – forcing the company to turn to rival Cummins Inc to supply engines as it develops its own catalytic reduction engines to reduce nitrogen oxide emissions.
What Should You Watch Out for With the Navistar International Corp Earnings Report?First, here is a quick recap of Navistar International Corp's recent earnings history from Yahoo! Finance:
| EPS Est | -1.13 | -1.30 | -1.63 | -1.77 |
| EPS Actual | -4.39 | -2.94 | -1.90 | -3.07 |
| Difference | -3.26 | -1.64 | -0.27 | -1.30 |
| Surprise % | -288.50% | -126.20% | -16.60% | -73.40% |
Early last March, Navistar International Corp reported results that missed expectations as revenue dropped about 16% to $2.21 billion (due to lower sales to the US military and its transition to a new emission technology) while the net loss widened to $248 million from $123 million. The President/CEO commented:
"We signaled that this would be a tough quarter due to our mid-range product transition, the ongoing reduced sales in our military business, and because the first quarter, historically, represents the weakest operational period of the year for us. Given all this, we are encouraged we hit our cash and adjusted EBITDA guidance. Clearly, we have more hard work to do to rebuild our market share and further reduce our costs, but we continue to make progress on our Drive to Deliver, and we feel we're off to a solid start in 2014."
Nevertheless, Navistar International Corp has continued engine restructuring efforts when it announced in February plans to consolidate mid-range engine manufacturing into its Melrose Park, Ill., engine plant. Once completed later this summer, these actions (including the idling the Huntsville, AL, mid-range engine plant) are expected to reduce the company's operating costs by more than $22 million annually. Moreover and as a next step in its engine business restructuring, the company announced it will add selective catalytic reduction (SCR) emissions technology to its high horsepower inline six-cylinder (I-6) engine platforms to complement the recent launch of the Cummins ISB.
This time around and according to the Yahoo! Finance analyst estimates page, the consensus expects revenue of $2.72B and EPS of -$1.31 verses consensus EPS estimates of -$1.29 seven days ago, -$1.22 thirty days ago, -$1.20 sixty days ago and -$0.83 ninety days ago.
On the news front, Navistar International Corp announced in late April that it would be increasing its production rates at its heavy truck assembly plant in Escobedo, Mexico, as well as its bus assembly plant in Tulsa, Okla. It was latter reported in late May that Cleveland Research channel checks indicated trends remain strong in the North American truck market, particularly in construction end markets. They also raised their 2014 heavy truck build forecast to 285k from 275k.
However, Navistar International Corp is also set to lose Ford Motor Company (NYSE: F) as a customer when the latter begins to make 55,600-and-up vehicles itself next year. Navistar International Corp plans to fill in the $400M business loss by chasing high-volume, medium-truck buyers such as big rental companies, municipalities and distributors.
What do the Navistar International Corp Charts Say?The latest technical chart for Navistar International Corp seems to indicate a slight downward trend:
Navistar International Corp is also basically flat since the end of the financial crisis while PACCAR Inc and Cummins Inc have put in
The latest technical chart for PACCAR Inc shows a downtrend since April while Cummins Inc has been trending upward for some time:
While Navistar International Corp has no doubt made some progress in its restructuring efforts, the company is clearly not out of the woods yet as needs to figure out how to plug the hole that will be left by Ford. Hence, most investors will probably want to stay on the sidelines until there are some clearer signs the company is on firmer ground.
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