UPDATED -- It's looking like a good Christmas for Navistar and FedEx. The truck and engine maker managed to cut back on its losses in its most recent fiscal quarter, and even more for the year, predicting a return to profitability in 2016. And it is on the cusp of an agreement with the Securities and Exchange Commission to remove an investigation that has been hanging over its head. Meanwhile, FedEx saw better earnings due to record holiday business.
Navistar International Corp. (NYSE: NAV) on Thursday reported a fourth quarter 2015 net loss of $50 million, 61 cents per diluted share. That's an improvement over its fourth quarter 2014 net loss of $72 million, or 88 cents per diluted share.
Revenues in the quarter were $2.5 billion compared to $3 billion a year earlier.
In its conference call with investors, according to the Wall Street Journal, company officials said they have offered to pay a fine to settle a U.S. Securities and Exchange Commission investigation into the company's actions surrounding its failed attempts to meet EPA 2010 emissoins regulations. While the deal has not yet been approved by the SEC, they said, it has been recommended by the agency’s investigators.
Fourth quarter 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) were $86 million, versus EBITDA of $66 million in the same period a year ago. This quarter included $69 million in restructuring-related and impairment charge and $40 million in pre-existing warranty adjustments
"We delivered on our adjusted EBITDA end-of year run rate target of 8% or better, thanks to a favorable mix of truck sales and record parts profitability in our core North America market in the fourth quarter," said Troy A. Clarke, Navistar president and chief executive officer. "We also benefited from our continued focus on cost management across our operations, marked by a $74 million improvement in structural costs in the quarter."
For the full 2015 fiscal year, Navistar reported a net loss of $184 million, or $2.25 per diluted share, improved significantly from a net loss of $619 million, or $7.60 per diluted share, for fiscal year 2014.
Revenue for fiscal year 2015 was $10.1 billion, down from $10.8 billion a year earlier.
Fiscal year 2015 adjusted EBITDA was $494 million versus $306 million for fiscal 2014.
Chargeouts (trucks that have been invoiced to customers, with units held in dealer inventory) in the company's core North America market increased by 3,500 units, or 6%, in 2015, reflecting an 18% increase in Class 6/7 medium-duty trucks, a 10% increase in school buses, and a 7% increase in Class 8 severe service, partially offset by a 4% decline in Class 8 heavy trucks.
Total market share for Class 6-8 trucks and buses for the year was 16%.
Operationally, the company reduced its total costs by more than $300 million in 2015, including $114 million in structural cost reductions, with the remainder coming from reduced material and logistics spending and lower manufacturing costs, according to Navistar.
"For the third consecutive year, we generated around $200 million in adjusted EBITDA improvement, and we expect this improvement trend to continue in 2016," Clarke said. "We are building the best products we've ever built, and we are winning back customers. We have identified and begun implementing actions to further lower our material spend and structural costs, while driving greater efficiencies in our manufacturing operations. As a result, we expect to build on our 2015 progress, and our goal is to achieve profitability and be free cash flow positive in 2016."
In Navistar’s truck segment business during its 2015 fiscal fourth quarter it recorded a loss of $36 million, compared with a year-ago loss of $40 million. For the fiscal year 2015, the truck segment recorded a loss of $141 million, compared with a fiscal year 2014 loss of $380 million.
For the fiscal fourth quarter of 2015, the parts segment recorded record profits of $163 million, compared to a year-ago fourth quarter profit of $150 million. During fiscal year 2015, the parts segment recorded record profits of $592 million, compared to a fiscal year 2014 profit of $528 million.
For next year, Navistar forecasts industry-wide retail deliveries of Class 6-8 trucks and buses in the U.S. and Canada will be in the range of 350,000 to 380,000 units. It's projecting full-year 2016 revenues of $9.5 billion - $10 billion and full-year 2016 adjusted EBITDA of $600 million - $700 million.
More details are on the Navistar International website.
FedEx Earnings Improve Despite Less LTL Business
Also on Thursday, FedEx Corp. (NYSE: FDX) reported net income for its fiscal 2016 second quarter ending Nov 30 increased to $691 million from $663 million a year earlier, an improvement in diluted earnings per share to $2.44 from $2.31.
Revenue increased to $12.5 billion from $11.9 billion in the 2015 fiscal second quarter.
Adjusted earnings of $2.58 per diluted share for the second compared to adjusted earnings of $2.16 per diluted share a year ago, which includes expenses related to the settlement of certain independent contractor litigation matters involving FedEx Ground (9 cents per diluted share) and the pending acquisition of TNT Express (4 cents per diluted share).
“FedEx Corp. posted solid earnings despite continued weakness in industrial production and global trade, and we are making impressive progress toward our goals to increase margins, earnings per share, cash flows, and returns on invested capital,” said Frederick W. Smith, FedEx Corp. chairman, president and CEO. “A record number of holiday shipments, fueled by the steady rise of e-commerce, are flowing through the FedEx global networks.”
Operating income increased to $1.14 billion in the most recent quarter from $1.09 billion a year earlier primarily due to higher base rates and the continued positive effects from profit improvement initiatives, according to FedEx. These benefits were partially offset by lower-than-anticipated volume at FedEx Freight and the modest negative net impact of fuel.
For the second quarter, the FedEx Freight segment reported revenue of $1.55 billion, down 2% from last year’s $1.59 billion as lower fuel surcharges more than offset base rate and volume growth.
Less-than-truckload (LTL) average daily shipments increased 1%, while weight per shipment decreased 1%. LTL revenue per shipment declined 3% due to lower fuel surcharges, partially offset by higher base rates.
Operating income totaled $101 million, down 10% from $112 million a year ago, primarily due to salaries and employee benefits expense significantly outpacing lower-than-anticipated volume.
FedEx Express reported revenue of $6.59 billion, down 6% from last year’s $7.02 billion as operating income totaled $622 million, up 26% from $492 million a year ago.
For the second quarter fiscal quarter FedEx Ground had revenue of $4.05 billion, up 32% from last year’s $3.06 billion as operating income totaled $526 million, up 13% from $465 million a year ago.
FedEx also reaffirmed its adjusted fiscal 2016 earnings outlook of $10.40 to $10.90 per diluted share before pension accounting adjustments. The outlook assumes moderate economic growth and excludes the independent contractor legal settlements and any TNT-related costs or operating results.
"We expect our solid earnings growth to continue in the second half of our fiscal year despite weakness in industrial production,” said Alan B. Graf, Jr., FedEx Corp. executive vice president and chief financial officer. “Our improved financial results are being driven by better revenue quality, e-commerce growth and the successful ongoing execution of our profit improvement initiatives."
There is more information on the FedEx investor relations website.
Update adds news about the SEC investigation settlement proposal.