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I have decided to release the Navistar update early, in draft form, to the site's paid subscribers. You can download the reports below.

 I.      Summary

By August 2008, US auto sales had witnessed ten months of consecutive decline as housing markets meltdown and financial crisis drag overall economic growth. Economic slowdown coupled with higher gasoline price (~more than $3.8 per gallon) and higher inflation is adversely impacting the sales of automobiles, with sales of truck and SUV segment being hit particularly hard as customers continue to shift towards alternative smaller fuel-efficient vehicles. As the global financial crisis led by Lehman bankruptcy and takeover of Merrill Lynch creep into the manufacturing sector in the form of further tightening of credit in an already credit-scarce market, demand for automobiles and commercial trucks is expected to remain subdued in the near-to-medium term. Although owing to the 2010 emission norms we expect 2009 commercial truck sales to pick up, we expect only a modest level of pre-buy activity in 2009 compared with the similar situation in 2006.

Navistar has demonstrated a strong resilience against economic headwinds by foraying into military segment. As a result, the company reported robust 3Q2008 results, ahead of our and analyst expectations. Going forward, as revenues from more profitable military segment remain more sustainable (until 2010), Navistar's earnings are expected to be positively impacted. However Navistar's core commercial trucking business, engine segment and financial services segment will continue to bear the major brunt of economic downturn, in our view. This along with increasing likelihood of non sustainability of current high level of gross margin over the long-term is likely to drag its valuation to... 

  pdf  Navistar Update - retail (335.47 kB 2008-09-17 23:06:30)  

pdf  Navistar Update - pro (214.22 kB 2008-09-17 23:07:58)