Truck- and diesel-engine maker believes it’s ready to rev up profits
Navistar (NYSE: NAV), the truck- and diesel-engine maker formerly known as International Harvester, recently reported earnings that were 10 percent below expectations. Fourth-quarter earnings dropped 55 percent over last year’s fourth quarter. Full-year profits dropped 32 percent, with revenue growth anemic at just 5 percent for the year. Yet not all is lost.
Check out a key reason for the earnings drop: Navistar inked a new four-year contract with the UAW. That cost it $0.14 per share in fourth-quarter profit, but secures the company against similar labor-cost surprises for the next four years, and gives the company a contented work force as it moves into 2011.
Better still, Navistar may well blow all these numbers away next year. CEO Daniel Ustian says that “the North American truck market has been depressed for three years.” But Ustian expects to generate “solid returns to our bottom line in 2012 and 2013.” Why? Because North American trucking is about to take its foot off the brake, as ancient trucking fleets turn over, and trucking companies make good on their promises to buy newer, more fuel-efficient, less accident-prone rigs.
Analysts expect this trucking renaissance to keep Navistar’s profits growing at an annualized 9.3 percent pace over the next five years.
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Back in 1999, I bought shares of a company that facilitates business-to-business commerce and communications for about $45 apiece. The stock quickly went north of $1,000 per share, but I didn’t sell. I still own it, and it’s been trading in the $20 range recently. – M.T., online
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