Navistar's Shares Fall


(Reuters) – Pulled down by employee termination costs and a reduction in military sales, Navistar International Corp (NAV.N) reported lower quarterly earnings.

The results were also taken down by a downswing in parts revenue. Sterne Agee's analyst, Ben Elias, described it as "disappointing" operating margins in the company's truck and engine segments, making Navistar shares fall further.

According to its annual report filed with the U.S. Securities and Exchange Commission, the company believes demand for its truck to escalate in the coming year as freight rates and volumes become better in conjunction with the overall economy.

Navistar abided by its prediction for industry-wide truck and bus sales in the United States and Canada this year. It assumes overall demand to increase nearly 25 percent to an extent of 230,000 and 250,000 vehicles this year.

However the manufacturer of International brand trucks, MaxxForce brand diesel engines, IC Bus brand buses, and Monaco brand motor-homes admonished that the persisting merger of the trucking industry was allowing the prevailing players "increased purchasing power," decreasing demand for its products.

In the midst of a conference call to talk about results, Navistar also mentioned it persisted to face concerns with some of its suppliers, concerns that analysts believe have back-watered delivery of its 13-liter engine.

"We have an ongoing list of suppliers that are challenged that we are working with," a company executive told the analysts. "We have some pinch points."

Navistar declared a revenue of $39 million, or 54 cents a share, for the fourth quarter ended on October 31, down from $86 million, or $1.19 a share, a year earlier.

Profits were 68 cents per share, discounting separation and layoff costs from a recent four-year contract with the United Automobile, Aerospace and Agricultural Implement Workers of America.

According to Thomson Reuters I/B/E/S, on that assumption, analysts on average assumed the Warrenville, Illinois-based company to declare a revenue of 60 cents a share.

Sales increased 2 percent to $3.37 billion, besting analysts' assessments of $3.21 billion.

"Given what they face, including a still pretty lousy North American market, I think it was a better quarter than we expected," said Kristine Kubacki, an analyst at Avondale Partners. "If this is as bad as it gets, I think there are better days ahead."

Navistar believes its military sales, which have plummeted from $3.9 billion in 2008 to $1.8 billion in 2010, would settle somewhere between $1.5 billion to $2 billion yearly.

The company's shares fell 3.5 percent at $57.10 in morning trading on the New York Stock Exchange.

The UAW approved a labor agreement that includes the removal of union positions at Navistar's Fort Wayne, Indiana, facility in October,.