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Company's Guidance |
Estimates |
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Revenues 2008 |
$15 bn + |
$14.1 bn |
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Income before tax 2008 |
$380 mn -$510 mn |
$335 mn |
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Net Income 2008 |
$312 mn - $418 mn |
$271 mn |
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EPS 2008 |
$4.26 - $5.72 |
$3.71 |
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Industry shipments |
15-19% decline |
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Navistar shipments |
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14% decline |
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Revenues 2009 |
$15 bn + |
$16.1 bn |
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Profit from manufacturing segment |
$1.6 bn |
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Income before tax 2009 |
$1,100 mn - $1,200 mn |
$370 mn |
We believe that Navistar’s 2009 guidance for income before tax seems quite unreasonable under the current circumstances due to following reasons. Navistar expects profit from manufacturing segment at $1.6 bn on total revenues of $15 mn implying a margin of 10.7% while in 2007 Navistar’s reported manufacturing profit of $426 mn on total revenues of $12.3 bn ( margin of 3.5%) . Also in 1H2008, Navistar generated total revenues of $6.9 bn while profit from manufacturing segment was $424 mn (margin of 6.1%). With intense competition and demand slowdown leading to pricing pressure on the one hand and commodity prices increase, particularly steel and aluminum, resulting in cost pressure we do not expect Navistar’s margins to expand substantially in the near-to-medium term.
