In the fast lane of global automotive growth, fueled by electrification and resilient demand, Blue Bird Corporation (BLBD) accelerates ahead with a transformative plan and operational finesse. In this article, I delve into the fundamentals of BLBD to assess its investment potential in the current market landscape. Let's understand in detail.
Despite geopolitical tensions and economic uncertainties, the global automotive industry has exhibited robust growth this year. The ongoing recovery in light vehicle output fueled global inventory restocking. Supply chain and demand resurgence, supported by lingering consumer demand, also contributed to this positive trajectory.
S&P Global Mobility forecasts an 8.9% increase in global light vehicle sales for the fiscal year of 2023, projecting sales to reach nearly 86 million units, surpassing 2022 levels. Furthermore, the forecast predicts a 2.8% year-over-year rise in global new light vehicle sales for 2024.
Meanwhile, a MarketsandMarkets report projects a robust global automotive sales growth, expecting an increase from 91 million units in 2023 to surpass 96 million units in 2024. This anticipated growth, with a steady 5-7% year-over-year rate, is underpinned by a resilient commercial vehicle sector and the electrification trend in passenger cars.
Against an improving industry backdrop, BLBD has executed a comprehensive transformational plan in recent years. The initiative focused on enhancing operations and throughput, managing fixed costs, reclaiming economic strength through strategic pricing, and solidifying its leadership position in alternative-powered buses.
With significant advancements achieved this year and improved clarity regarding the 2024 operating landscape, BLBD has revised its full-year financial projections for the upcoming year. The company anticipates net revenue between $1.15 billion and $1.25 billion.
Also, it anticipates Adjusted EBITDA in the range of $105 million to $125 million and adjusted free cash flow between $50 million and $60 million. Furthermore, BLBD has reiterated its long-term vision of achieving profitable growth towards approximately $2 billion in revenues, along with maintaining adjusted EBITDA margins of 12% or more.
Moreover, in collaboration with Generate Capital, a sustainable investment and operating company, BLBD has recently established a joint venture named Clean Bus Solutions, LLC. The partnership aims to address the growing demand for electric school buses and expedite the adoption of clean transportation for students in North America.
The company is actively enhancing its electric vehicle production capacity. It has inaugurated the Electric Vehicle (EV) Build-up Center, a specialized 40,000 sq. ft. facility. This development positions BLBD to substantially boost its production of electric school buses, with a potential capacity of up to 5,000 EVs annually in the foreseeable future.
Shares of BLBD have gained 38% over the past month and 186.5% over the past year to close the last trading session at $26.01.
Here are the financial aspects of BLBD that could influence its performance in the near term:
Solid Last Reported Financials
For the fiscal fourth quarter that ended September 30, 2023, BLBD’s net sales increased 17.6% year-over-year to $302.96 million. Its adjusted EBITDA came in at $40.71 million, compared to a loss of $16.24 million in the prior year’s period.
In addition, the company’s adjusted net income and adjusted earnings per share amounted to $21.35 million and $0.66, compared to an adjusted loss and adjusted loss per share of $21.38 million and $0.66 in the previous year’s quarter, respectively.
Robust Growth Record
Over the past three years, BLBD’s revenue and EBITDA increased at a CAGR of 8.8% and 17.2%, respectively. Its net income and EPS grew at respective CAGRs of 25% and 18%. Moreover, the company’s total assets rose at a CAGR of 9.6% over the same time frame.
Positive Analyst Estimates
The consensus revenue estimate of $1.23 billion for the fiscal year ending September 2024 reflects an 8.3% year-over-year improvement. Moreover, the company’s EPS for the same period is estimated to come in at $1.93, up 80.4% from the prior year. Furthermore, BLBD topped the consensus revenue and EPS estimates in all four trailing quarters.
Discounted Valuation
In terms of forward non-GAAP P/E, BLBD is trading at 13.47x, 29.1% lower than the industry average of 18.99x. Its forward EV/Sales of 0.73x is 59.4% lower than the 1.80x industry average. Moreover, BLBD’s forward EV/EBITDA of 7.52x is 35.4% lower than the 11.63x industry average.
Higher-Than-Industry Profitability
The stock’s trailing-12-month levered FCF margin of 9.23% is 52.1% higher than the industry average of 6.07%. Its trailing-12-month asset turnover ratio of 2.89x is 261.5% higher than the 0.80x industry average. Moreover, the stock’s trailing-12-month ROCE of 115.09% compare with the industry average of 12.23%.
POWR Ratings Exhibit Strong Prospects
BLBD’s strong outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. BLBD has an A grade for Quality, in sync with its robust profitability. In addition, the stock has a B grade for Value, consistent with its lower-than-industry valuation.
BLBD has ranked #9 in the 52-stock Auto & Vehicle Manufacturers industry. Click here to access BLBD’s Growth, Momentum, Stability, and Sentiment ratings.
Bottom Line
Ongoing recovery in light vehicle output, resilient supply chains, and sustained consumer demand underscore a positive trajectory in the automotive sphere. Simultaneously, the industry's forward thrust is being accentuated by the electrification wave in passenger cars and a resilient commercial vehicle sector.
Strategically navigating this landscape, BLBD positions itself adeptly. It orchestrated a transformative plan, emphasizing operational excellence and a niche focus on electric school buses, elevating its allure as a compelling investment within the evolving automotive sector.
Beyond strategic positioning, the company's commendable profitability, discounted valuation, and optimistic analyst outlook could make it an ideal buy in the current automotive market.
How Does Blue Bird Corporation (BLBD) Stack Up Against Its Peers?
While BLBD has an overall grade of A, equating to a Strong Buy rating, you may also check out these other A (Strong Buy) stocks within the Auto & Vehicle Manufacturers industry: Mercedes-Benz Group AG (MBGAF), Honda Motor Co., Ltd. (HMC), and Mazda Motor Corporation (MZDAY). To explore more Auto & Vehicle Manufacturers stocks, click here.
What To Do Next?
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BLBD shares fell $1.08 (-4.15%) in premarket trading Friday. Year-to-date, BLBD has gained 142.86%, versus a 24.79% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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