Navistar International Corp (NYSE: NAV) reported fiscal third-quarter earnings Thursday that foreshadow a large uptick in EBITDA in the coming year, according to Buckingham Research Group.
Analyst Neil Frohnapple upgraded Navistar from Neutral to Buy with an unchanged $48 price target.
Navistar posted an adjusted EBITDA of $218 million which matched expectations, and an adjusted EBITDA margin beat of 8.4 percent versus expectations of 8.1 percent, Frohnapple said in the upgrade note.
The truck manufacturer appears set for six years of consecutive improvement in nominal EBITDA and EBITDA margins — an encouraging metric, as a 20-percent manufacturing sales decline occurred over the same period, the analyst said.
Navistar should show continued margin expansion over the coming years due to continued benefits from the TRATON alliance, which will likely lead to a complete takeover, Frohnapple said. In the near-term, the company encouragingly guided to higher Q4 sales and committed to aggressively managing any supplier constraint headwinds, he said.
Navistar stock is trading at 7.2 times 2018 EV/EBITDA estimates and 6.4 times 2019 estimates, which is at the low end of the stock's three-year average range. Buckingham's $48 price target is based on a 7.6 times multiple on 2019 EV/EBITDA estimates.
Navistar shares were trading up 0.16 percent to $37.22 at the time of publication Friday.
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