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Why Navistar Shares Plunged

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Navistar International (NYSE: NAV  ) sank 11% on Tuesday after a federal appeals court struck down an Environmental Protection Agency rule that allowed the company to sell noncompliant truck engines if it paid a fine.

So what: Naturally, today's news triggers serious concerns over the company's growth going forward as it threatens to suspend sales. Without the luxury of simply being able to pay a fine, Navistar must rush to get its engines certified or risk having to stop production in order to pursue an industry standard "SCR" after-treatment technology.

Now what: Navistar intends to ask the court for a rehearing and, in the meantime, still plans to continue to ship engines until it receives further instructions from the EPA. "Our customers will continue to receive the products they ordered," a Navistar spokeswoman said. Of course, when you couple this new cloud of uncertainty with Navistar's already heavy debt load, I'd be highly cautious about buying into today's pullback.

Interested in more info on Navistar? Add it to your watchlist.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. Try any of our Foolish newsletter services free for 30 days.

We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always gets a perfect score.

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10/28/2016 1:50 PM
NAV $22.38 Up +0.07 +0.31%
Navistar Internati… CAPS Rating: **