Deutsche Bank Boosts Navistar Target From $14 To $21 Following Earnings

Navistar International Corp (NYSE: NAV) reported its EPS short of expectations due to disappointing top-line and Truck profit results. Deutsche Bank’s Nicole DeBlase maintained a Hold rating on the company, while raising the price target from $14 to $21 to reflect the recently announced partnership with Volkswagen AG (OTCMKTS: VLKAY).

Although Navistar reported its EPS at $0.56, missing consensus expectations, management reiterated the full-year guidance. Analyst DeBlase considers the guidance as achievable.

Navistar’s market share continues to contract, with the medium-duty market share shirking from 27 percent in the previous quarter to 20 percent and the Class 8 heavy market share contracting from 11 percent to 9 percent.

Partnership With VW

“It is unclear whether the recently announced Volkswagen/Navistar alliance will morph NAV from a market share loser to a winner,” DeBlase wrote. She added, however, that Volkswagen’s share of the Western EU truck market had expanded steadily over the past few years and currently stood at 29 percent.

“That said, brand transformations are complicated and take time, especially since existing customers need to be supported, and fleets are generally slow to adopt change,” the analyst commented, while adding, “The good news is that the associated liquidity bump ($256m equity investment from VW) and procurement savings ($500m cumulative over five years) likely eliminates the bear case (insolvency).”

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