Will This Downgrade Hurt Navistar (NAV) Today? (Update)

Update (9:35 a.m.): Updated with Tuesday market open information.

NEW YORK (TheStreet) -- UBS downgraded Navistar  (NAV) to "neutral" from "buy" and set a $44 target price. The firm noted slower ramp to improved profitability and warranty expenses that exceeded expectations.

The stock was down 0.24% to $33.18 at 9:34 a.m. on Tuesday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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Separately, TheStreet Ratings team rates NAVISTAR INTERNATIONAL CORP as a "sell" with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:

"We rate NAVISTAR INTERNATIONAL CORP (NAV) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, poor profit margins, weak operating cash flow and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Machinery industry. The net income has significantly decreased by 101.6% when compared to the same quarter one year ago, falling from -$123.00 million to -$248.00 million.
  • The gross profit margin for NAVISTAR INTERNATIONAL CORP is currently extremely low, coming in at 12.68%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -11.23% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$93.00 million or 240.90% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • The share price of NAVISTAR INTERNATIONAL CORP has not done very well: it is down 6.19% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 17.1%. Since the same quarter one year prior, revenues fell by 16.3%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • You can view the full analysis from the report here: NAV Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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