The Zacks Analyst Blog Highlights: Navistar International, PACCAR, FedEx, The Boeing and United Parcel Service

Sep 09, 2011, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Sept. 9, 2011 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Navistar International Corp. (NYSE: NAV), PACCAR Inc. (Nasdaq: PCAR), FedEx Corporation (NYSE: FDX), The Boeing Co. (NYSE: BA) and United Parcel Service Inc. (NYSE: UPS).

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Here are highlights from Thursday's Analyst Blog:

Navistar Profits Fall, Misses

Navistar International Corp. (NYSE: NAV) recorded a 43% fall in profit to $61 million or 79 cents per share in the third quarter of its fiscal year ended July 31, 2011 from $107 million or $1.44 per share in the comparable quarter a year ago.

The profit excluded income tax valuation allowance release and costs associated with the restructuring of North American manufacturing operations and engineering integration. It was significantly lower than the Zacks Consensus Estimate of $1.35 per share.

The decrease in profit was attributable to lower finance revenues and higher cost of goods sold. Revenues in the quarter rose 10% to $3.54 billion.

Manufacturing segment profit slashed 44% to $157 million from $278 million a year ago (excluding restructuring charges of North American manufacturing operations and engineering integration charges) due to considerable fall in profit in the company's Truck segment.

Guidance

Navistar, a Zacks #3 Rank (Hold) stock, projected to earn between $388 million and $465 million or $5.50 per share to $6.00 per share for the fiscal year ending October 31, 2011, excluding transition costs associated with the integration of the truck and engine engineering operation. The company expected to generate manufacturing cash of $1.2 to $1.4 billion at the end of the fiscal year.

Peer Results

Navistar is one of the largest truck producers after PACCAR Inc. (Nasdaq: PCAR). PACCAR reported a profit of $239.7 million or 65 cents per share in the second quarter of the year that more than doubled from $99.6 million or 27 cents per share in the prior-year quarter. However, the truck maker's profit missed the Zacks Consensus Estimate of 68 cents per share.

The improvement in profit reflected strong truck sales in North America and Europe and better aftermarket parts sales and financial services results worldwide. However, the company's suppliers faced difficulty while catering to the robust increase in truck build rates.

FedEx Eyes Boeing Aircraft

FedEx Corporation (NYSE: FDX), the world's second-largest package delivery company, is mulling to buy freighters from The Boeing Co. (NYSE: BA) and Airbus to make its fleet more fuel efficient.

The company intends to replace its older and less-efficient aircraft. This move will reduce transit time and lead to fuel and operational efficiencies, providing FedEx a competitive edge over its peers, particularly United Parcel Service Inc. (NYSE: UPS).

FedEx is in talks to purchase about 50 Boeing 767 and Airbus A330 freighters. The company expects to invest 23.5% more in fiscal 2012 compared with the prior fiscal year. About 60% of the investments are allocated toward growth projects, including the expansion of FedEx Express' Asian and European networks, FedEx Ground's network, and replacement of vehicles and equipment at FedEx Freight.

As of May, FedEx had 688 planes in its fleet, out of which 276 were Boeing aircraft and 124 Airbus aircraft. The rest were smaller aircraft such as Cessna 208B and ATR turboprops.

The investment will generate significant long-term savings, support international business growth as well as drive higher earnings, margins and returns. FedEx is on track with its long-term goals of more than 10.0% revenue growth and operating margin, cash flow improvement and increasing returns on invested capital.

However, the purchase might slow down due to the weak economic outlook and the risk of losing postal service business. FedEx is the largest contractor for postal service.

Hence, we are maintaining our long-term Neutral rating on FedEx. For the short term (1–3 months), the stock retains a Hold rating with a Zacks #3 Rank.

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