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Navistar's Improving Business Makes It a Good Investment Opportunity

December 11, 2014 | About:

Navistar International (NYSE:NAV) is now growing at a good pace. With robust growth in the North American truck market, Navistar is expecting class 6 and 8 trucks and buses to improve its results.

Seeing positive momentum

Navistar is seeing positive response from its dealers and customers. The main thing which is attracting the customers is the company’s quality products with excellent performance and fuel economy. The company is also working on reducing the costs and expenditure to improve its margins. Its engine restructuring and previous reduction in the core sanctions is helping Navistar to further lower its structural costs. Considering this initiative fruitful, Navistar has also posted an upbeat outlook and to make it more profitable, Navistar is taking aggressive steps and implementing lean principles.

However, Navistar is cautious about the decline that it might face in Brazil. This decline due to a weak economy is expected to affect the entire industry. It is anticipated that the demand for engine volume will decline by 18%. Navistar is making progress in lowering its fixed costs. Navistar is expecting gradual improvement in the profitability with the recovery in the economy.

Moreover, Navistar is seeing good response in the market for its products. It is clearly evident with the growing market share that the company is seeing due to good traction that it is seeing for its SCR product. The company also has plans to bring in several new products in the market and to make it happen, it is building a right momentum that might support its growth efforts.

The way ahead

Navistar is focused on improving sales. It is making several efforts to drive its sales forward. In this regard, the company is engaged in rebuilding a strong relationship with the customers. It is focusing on the truck market and aiming at providing the customers with the best products. In addition, to hold a competitive edge in the market, Navistar will continue to bring in new products in short time intervals through 2015.

Navistar is seeing good decline in the warranty spending. It is also leading to lower its expenses which is improving its margins. The cost of repair is declining due to better repair activities. The improvement in the quality of SCR engine is the key driver of lower warranty spending on these engines. The new remote diagnostic products and on demand Connections are expected to further decrease its warranty expense, helping the company to increase the vehicle uptime also supporting quicker repair. This will be a great contributor to the company in lowering maintenance and repair costs.


The stock doesn’t have a trailing P/E as it is narrowing its losses and it might take some time to get fully turned around. Further, the forward P/E of 16.33 indicates good earnings growth in the near term. Hence, investors should think of adding Navistar to their portfolio as it is on track to improve.

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