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Earnings Watch: Navistar Losses Nearly Double from Year Earlier

Navistar International Corp. on Tuesday announced its financial losses in the first quarter of 2017 nearly doubled from the same time a year ago due to lower truck volume and softer Class 8 truck sales.

Evan Lockridge
Evan LockridgeFormer Business Contributing Editor
March 7, 2017
Earnings Watch: Navistar Losses Nearly Double from Year Earlier

 

3 min to read


Navistar International Corp. on Tuesday announced its financial losses in the first quarter of 2017 nearly doubled from the same time a year ago due to lower truck volume and softer Class 8 truck sales.

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The truck and engine maker reported a net loss of $62 million, or 76 cents per share, greater than a consensus estimate from a poll of analysts, who were forecasting a 45 cents per share loss. This compares to a first quarter 2016 net loss of $33 million, or 40 cent per share. 

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Revenue in the most recent quarter totaled $1.7 billion, in line with Wall Street expectations, but a decline of 6% compared to $1.8 billion in the first quarter last year. The quarter marked the company’s eighth consecutive decline in quarterly revenue, according to Reuters.

First quarter 2017 earnings before interest, taxes, depreciation and amortization (EBITDA) was $63 million, compared to first quarter 2016 EBITDA of $82 million. This most recent period included favorable net adjustments of $8 million, primarily resulting from a reversal of pre-existing warranty accruals.

"Our results are on track with our plan for the year, and demonstrate our ability to effectively manage costs at a time of persistent Class 8 industry headwinds," said Troy A. Clarke, chairman, president and CEO. "Our order share continues to outpace our market share, which confirms our confidence in the retail share improvement to come."

Truck-segment first quarter 2017 net sales decreased $105 million, or 9%, primarily due to lower core (Class 6-8 trucks and buses in the United States and Canada) truck volumes “as a result of softer industry conditions, the end of CAT-branded units sold to Caterpillar, and the sale of Pure Power Technologies, both of which occurred in the second quarter of 2016.” 

During the most recent quarter, Navistar’s truck segment loss increased to $69 million versus a loss of $51 million in the same period a year ago.

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“This was primarily driven by market pressures, the impact of lower core market volumes, and a decrease in other income due to the receipt of a one-time fee from a third party last year, partially offset by lower used truck losses, improved material costs and lower adjustments to pre-existing warranties,” the company said in a statement.

Its parts-segment net sales were comparable to the prior year while its global-operations segment net sales decreased $42 million, or 46%. The Financial Services segment net revenues decreased by $5 million, or 8%, and profit decreased by $13 million, or 50%.

Last week, Navistar announced the closing of its wide-ranging strategic alliance with Volkswagen Truck & Bus, which included a $256 million equity investment in Navistar by that company and the creation of a procurement joint venture and a strategic technology and supply collaboration, both of which are already up and running. The deal gives the German auto and truck maker a 16.6% stake in Navistar.

Looking ahead, Navistar plans to continue to introduce new products every four to six months through the end of 2018, refreshing its entire product portfolio, while also expanding it with its re-entry into Class 4/5 vehicles through its collaboration with General Motors.

In the first quarter, Navistar began customer deliveries of its new International LT Series Class 8 long-haul truck and last week unveiled its 13-liter A26 engine.

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Also on Tuesday, Navistar reiterated and updated its 2017 guidance:

  • Retail deliveries of Class 6-8 trucks and buses in the United States and Canada are forecast to be in the range of 305,000 to 335,000 units for fiscal year 2017

  • Full-year 2017 revenues are expected to be similar to 2016

  • Full-year 2017 adjusted EBITDA is expected to be higher than 2016

  • Fiscal year end 2017 manufacturing cash is now expected to be about $1 billion, including the capital injection from Volkswagen Truck & Bus and a $250 million senior note tack-on completed in the first quarter 2017

Related: Navistar, Volkswagen Close Strategic Alliance Deal

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