Navistar International is a holding company of military vehicle, diesel engine, RV, bus, and other vehicle-related businesses. Icahn initiated a position in the company in the third quarter of 2011 buying 1,765,647 shares at an average price of $44. In the fourth quarter of 2011, he added 5,485,779 shares at an average price of $38.50. In the current second quarter he has been adding shares more aggressively, with four new buys in a little over a month.
News that coincided with his first second-quarter purchase on June 7 was the announcement of a management reorganization and second-quarter financial results, which CEO Daniel Ustian called “unacceptable.”
Navistar reported a $172 million net loss, or $2.50 per diluted shares, for the second quarter, compared to net income of $80 million in the prior-year quarter. In the first six months ended April 30, it recorded a net loss of $302 million, or $4.69 per diluted share, compared to net income of $94 million for the same period of 2011.
The company experienced particular challenge in its truck segment due to lower military budgets, industry-wide higher commodity and fuel costs and various charges. The segment reported a loss of $108 million, compared to $2 million in the year-ago second quarter. Sales in the segment increased 4% due to increase volume in traditional markets and strong volume in South America.
Its engine segment also recorded a net loss of $108 million and a 6% decrease in sales volumes. Its parts segment had a $41 million profit, driven by changes in military budgets. Its financial services segment had a $26 million profit, which the company expects to slowly decline as it liquidates its U.S. retail loan portfolio as it obtain U.S. retail financing from GE Capital.
The company revised its full-year net income guidance to between breakeven and $140 million, or $0 to $2 adjusted diluted earnings per share. This is after announcing full-year guidance in the first-quarter of $295 and $365 million or $4.25 to $5.25 adjusted diluted earnings per share.
Icahn discussed Navistar in a July 9 Bloomberg interview, saying that he was not sure yet what he sort of change he would push for at the company, but that it did not suffer from the same board issues that his other companies have. He thinks the main culprit has been the new type of diesel engine it is developing that uses low-emission liquid urea as fuel, which has not yet obtained regulatory approval.
Navistar has a P/E ratio of 271.3 and P/S ratio of 0.1 and an annual average earnings growth of 3.4% over the past 10 years.
Icahn’s Navistar purchases have pushed it up to the eighth largest position in his portfolio. His top holdings are Icahn Enterprises LP (NASDAQ:IEP), Federal-Mogul Corporation (NASDAQ:FDML), Motorola Mobility Holdings Inc. (NYSE:MMI), Forest Laboratories Inc. (FRX) and Amylin Pharmaceuticals Inc. (AMLN).
See all of Icahn’s holdings in his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Carl Icahn.