Navistar International Corp (NAV.N) rode momentum in the U.S. and Latin American truck markets to a better-than-expected profit increase in the fiscal fourth quarter, sending company shares significantly higher Tuesday.
Navistar Chief Executive Dan Ustian also reiterated interest in a collaboration on defense and commercial vehicles with rival Oshkosh Corp (OSK.N).
Navistar, a truck and engine maker, has weathered a significant downturn in demand for heavy trucks and engines as customers have gone out of business, consolidated, or cut budgets. A combination of improving market conditions, lower costs and a "sustained" performance in its military business helped lead the company to its highest profit since 2008.
"We are pleased that we finished the year strong," Ustian said in a press release. "We continued to invest in our strategy and set the foundation for a strong 2012."
The company did not give specific guidance for 2012 on Tuesday, but it expects higher sales in 2012 as customers refresh aging fleets. Trucking companies will also benefit as an economic recovery leads to higher freight volumes and higher shipping rates, the company said.
Navistar expects total U.S. industry sales of the heavier trucks Navistar sells to increase to a range of 275,00 to 310,000 trucks in 2012, up from about 260,000 in 2011. Ustian said that sales of military vehicles -- representing 13 percent of Navistar's business -- will suffer a modest slump, however.
"Defense will be a little lower next year than this year, so we've got to overcome that."
Navistar has been in the spotlight as billionaire investor and major shareholder Carl Icahn has supported a potential tie-up with rival Oshkosh.
Ustian, speaking during the company's fourth-quarter earnings call, said "there are some synergies in our two companies...(and) some collaboration we think might be beneficial for everybody." He said that Navistar's commercial and defense vehicle businesses "parallel" Oshkosh product lines.
Ustian also indicated he sees an opportunity to supply Oshkosh with engines and vehicle chassis components. However, some of Oshkosh's business lines, such as the JLG commercial lift business, do not make sense for Navistar, he said.
On Monday, Owl Creek Asset Management founder Jeffrey Altman filed a disclosure noting his "concerns" about such a merger. Altman said Navistar needs to "demonstrate the ability to derive significant value from synergies."
Owl Creek owns 8.5 percent of Navistar's common shares. Icahn owns nearly-10 percent stakes in both Oshkosh and Navistar, and has nominated a slate of Oshkosh directors in advance of a January annual meeting.
Shares of Navistar soared Tuesday following the company's earnings report, trading up 6.6 percent at $38.97. Shares of Oshkosh also recorded strong gains Tuesday, trading up 6 percent at $22.15.
Navistar's fourth-quarter net income for the period ending October 31 jumped to $255 million, or $3.48 a share, from $44 million, or 61 cents a share, a year ago. Excluding items, the company earned $3.37 a share.
The company said fourth-quarter results were affected by an income tax valuation allowance release, restructuring costs and the impact of the Medicare Part D court ruling.
Jefferies & Co equity analyst Stephen Volkmann said in a note to investors that the fourth quarter's results "showed several signs that Navistar is executing on its plans."
Sales rose 28 percent to $4.32 billion.
Analysts, on average, had expected earnings of $3.08 a share, on revenue of $4.44 billion in the fourth quarter, according to Thomson Reuters I/B/E/S.
For the full year, Navistar reported net income of $1.7 billion on $14 billion in revenue, $3 billion of which came from outside North America.
Navistar said that its engine business, which supplies components to a variety of customers, returned to profitability in the second half of the year as the company has raced to meet demand for smaller, more fuel-efficient engines. In addition to making engines for its own trucks, the company supplies engines to Deere & Co (DE.N), Cummins Inc (CMI.N), Daimler AG (DAIGn.DE) and other truck makers.
The company's core truck-making business is benefiting from increased demand in the U.S., Canada and Latin America.
(Editing by Dave Zimmerman)
(Editing by Dave Zimmerman)