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December 19, 2017 11:15 AM, EST

Navistar Finishes Strong, Reports Profitable 4Q, Fiscal Year

CEO Troy Clarke Sees Momentum Carrying Into 2018
Navistar's International LT truck on display at the 2017 NACV.Navistar's International LT truck on display at the 2017 NACV by John Sommers II for Transport Topics.

Navistar International Corp. reported net income and revenue increases for its fiscal year fourth quarter and full-year periods amid higher demand for its International brand trucks. It was the company’s second-consecutive profitable quarter, and only its third profitable quarter over the last 21 quarterly periods.

“2017 started slow, but it finished strong. And we took advantage of the second-half growth in the classes 6-8 truck market,” said Navistar Chairman and CEO Troy Clarke during an earnings call with analysts Dec. 19.

Navistar’s results for the period ended Oct. 31 “concluded a breakthrough year” Clarke said, as the company achieved full-year profitability for the first time since 2011. Its core products — classes 6-8 trucks and buses — gained 1.5% in North American market share.

MORE FROM CLARKE: Says Navistar is regaining truck buyers' trust

Quarterly net income soared to $135 million, or $1.36 per diluted share, compared with a net loss of $34 million, or 42 cents, in the 2016 period. Quarterly revenue rose 26% to $2.6 billion.

The truck segment recorded a profit of $112 million compared with a loss of $61 million in the 2016 period, and the result reflected a decrease in used-truck losses, according to the Lisle, Ill.-based company.

International HX Series heavy-haul tractor (Navistar International Corp.)

Profits in the company’s parts segment slipped to $157 million, down $5 million year-over-year. The slip was partially offset by double-digit revenue growth from its Fleetrite and remanufactured parts businesses.

Navistar reported it sold more than 3,300 used trucks in the quarter, a record for the truck maker. It now has $206 million in used-truck inventory, and called that within the range of normal operations. The company has labored to sell trucks that came with its troubled MaxxForce 13 exhaust gas recirculation engines, which failed to meet 2010-level emissions standards and which were developed under the company’s previous management.

One analyst sees potential for more growth with the company’s revamped truck lineup.

“The Class 8 segment stands out to us as being the area where Navistar most clearly has room for improvement, especially as the company has about 16% market share in 15L engines and only about 3% share in 13L engines, where the company has just now launched a highly competitive product in the A26 engine,” Stifel, Nicolaus & Co. analyst Michael Baudendistel wrote in a note to investors.

In 2017, the A26 became available in both its LT and regional haul RH series. And in 2018, Navistar will launch the engine in its heavy-duty vocational HX and HV series.

Also, Navistar said it has about 370,000 users of its OnCommand Connection service, which now includes expanded telematics features and electronic logging capability.

OnCommand Connection’s future includes a focus on insurance and load-origination as well as selling other apps, the company said.

The system will become “the digital backbone for things like insurance companies and load providers, and those are the kind of things which are also coming to the market and will also be revenue generators,” said Walter Borst, Navistar’s chief financial officer. “This is a marketplace which really gives us the opportunity to not only sell the telematics product, but to sell other apps through that marketplace, and ultimately gain access to segments of the market where we’re underrepresented for the purpose of selling things like Fleetrite parts.”

For Navistar’s full fiscal year 2017, net income climbed to $30 million, or 32 cents, compared with a net loss of $97 million, or $1.19, a year earlier.

The truck segment improved its earnings but it still recorded a loss of $6 million, compared with a loss of $189 million in the full-year period in 2016. Also, the parts segment recorded its second-largest profit ever at $616 million, but was down 4% from $640 million in the 2016 period.

Revenue rose 6% to $8.6 billion.

Navistar projected the 2018 Class 8 market will increase by about 13.5% over 2017 to 220,000 to 250,000 units, which would make it the third-best year of this decade.

“We have the production capacity required to take advantage of any upside that develops. We are well-positioned to gain more share in 2018,” Clarke said.

The company’s 2018 new product pipeline includes a new medium-duty truck, an updated LoneStar, a gasoline-powered CE school bus and a reintroduced RE bus.

“We will also enter the Class 4-5 market. By the end of 2018, we will have an entirely renewed truck lineup,” Clarke said. “We think 2018 is shaping up to be one of the strongest industry years this decade, and we’re positioned to make it a breakout year for Navistar.”