Shares of vehicle maker Navistar International (NYSE: NAV ) hit a 52-week low today. Let's take a look at how the company got there to find out whether cloudy skies remain on the horizon.
How it got here
Navistar's been on a slide since the beginning of February, though there hasn't necessarily been much news contributing to the stock's steady downward pressure. However, what news we've seen has been generally negative, from weak guidance at the start of the slide to a disappointing first quarter that saw the company swing to a loss. In between, there have been hints of hard times ahead, including EPA fines for dirty engines, more heavy truck order cancellations than the economy's seen in two years, and competitors Cummins (NYSE: CMI ) and PACCAR (Nasdaq: PCAR ) both posting solid earnings that made Navistar's flop look even uglier.
The sector's been a mixed bag for a while, but Navistar's the black sheep, with a worse performance than its peers over the past half-decade:
Investors don't seem much interested in Navistar's new initiatives, including multiple new engines in development and a major nat-gas engine partnership with Clean Energy Fuels (Nasdaq: CLNE ) . The company's ridiculously low P/E is also discounted, though its five-year P/E ratio is still much lower than its peers.
What you need to know
Navistar's currently quite a bit discounted compared with other truck and engine makers, although its rock-bottom valuation is the result of a tax benefit that the Street brushed off and has ignored since. Without that boost, Navistar's P/E would actually be 11.1, which is in line with its peers, as you can see from the table below:
Compound Annual 3-Year Earnings Growth (TTM)
Net Margin (TTM)
|Oshkosh (NYSE: OSK )||10.9||NM||2.3%|
Sources: Yahoo! Finance, S&P Capital IQ. NM = Not material because of negative earnings during the calculated period. TTM = trailing 12 months.
Oshkosh isn't an odd man out in the truck maker earnings boom, but starting from annual results that were more than a billion dollars in the red broke the calculator. However, since the starting point for all these companies was an abysmal 2009, I wouldn't read too much into this big growth. Both Navistar and Oshkosh are projected to see significant earnings shrinkage this year, but an economic slowdown is likely to hit all these companies to some extent.
Where does Navistar go from here? That will depend on how it recovers from recent regulatory and warranty problems in the nearer term, and in its ability to take advantage of the long-hyped natural gas trucking conversion. Other nat-gas engine stocks, including Clean Energy Fuels, have been hammered lately, so the broader market's distrust of this technology could represent a good buying opportunity -- or a value trap. The Motley Fool's CAPS community seems to believe in the latter possibility, giving Navistar a two-star rating, with 18% expecting the stock to continue its 52-week trend lower.
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