UPDATE 5-Navistar posts lower profit; shares fall

* Q4 EPS $0.54 vs. $1.19 year earlier

* Q4 EPS ex-items $0.68 vs. Wall St view $0.60

* Sales rise 2 percent, beating Wall St view

* But margins contract, shares down 3.5 pct
(Adds comments from conference call, updates shares)

By James B. Kelleher

CHICAGO, Dec 22 (BestGrowthStock) – Navistar International Corp
(NAV.N: ) reported lower quarterly earnings on Wednesday, pulled
down by employee termination costs and a contraction in
military sales.

The results were also pulled down by a decline in parts
revenue and what analyst Ben Elias at Sterne Agee characterized
as “disappointing” operating margins in the company’s truck and
engine segments, sending Navistar shares lower.

The company expects demand for its trucks to increase in
the coming year as freight rates and volumes improve along with
the overall economy, it said in its annual report filed with
the U.S. Securities and Exchange Commission.

Navistar stood by its forecast for industrywide truck and
bus sales in the United States and Canada next year. It expects
overall demand to rise about 25 percent to a range of 230,000
and 250,000 vehicles in 2011.

But the maker of International brand trucks, MaxxForce
brand diesel engines, IC Bus brand buses and Monaco brand
motorhomes warned that the continuing consolidation of the
trucking industry was giving the remaining players “increased
purchasing power,” reducing demand for its products.

During a conference call to discuss the results, Navistar
also said it continued to face issues with some of its
suppliers, issues that analysts say have slowed delivery of its
13-liter engine.

“We have an ongoing list of suppliers that are challenged
that we are working with,” a company executive told the
analysts. “We have some pinch points.”

Navistar reported a profit of $39 million, or 54 cents a
share, for the fourth quarter ended on Oct. 31, down from $86
million, or $1.19 a share, a year earlier.

Excluding separation and layoff costs from a new four-year
contract with the United Automobile, Aerospace and Agricultural
Implement Workers of America, earnings were 68 cents per

On that basis, analysts on average expected the
Warrenville, Illinois-based company to report a profit of 60
cents a share, according to Thomson Reuters I/B/E/S.

Sales rose 2 percent to $3.37 billion, beating analysts’
estimates of $3.21 billion.

“Given what they face, including a still pretty lousy North
American market, I think it was a better quarter than we
expected,” said Kristine Kubacki, an analyst at Avondale
Partners. “If this is as bad as it gets, I think there are
better days ahead.”

Navistar expects its military sales, which have fallen from
$3.9 billion in 2008 to $1.8 billion in 2010, would stabilize
somewhere between $1.5 billion to $2 billion annually.

The company’s shares were down 3.5 percent at $57.10 in
morning trading on the New York Stock Exchange.

In October, the UAW ratified a labor agreement that
includes the elimination of union positions at Navistar’s Fort
Wayne, Indiana, facility.
(Reporting by James B. Kelleher; Editing by Lisa Von Ahn,
Derek Caney, Dave Zimmerman)

UPDATE 5-Navistar posts lower profit; shares fall