Is Blue Bird the Best Play in Electric School Buses?

Blue Bird Corporation (BLBD), a leader in electric and low-emission school buses, surpassed the third-quarter top and bottom-line analyst expectations. The company posted a net sales of $333.37 million, surpassing the consensus estimate of $326.69 million. Also, its non-GAAP EPS was $0.91 for the third quarter, compared to analysts’ expectations of $0.51.

During August, Blue Bird delivered its 2,000th electric, zero-emission school bus, marking an industry-leading milestone and reinstating its leadership in the segment. The company delivered its new, extended-range battery, CCSD's milestone zero-emission vehicle that can carry 84 students to Clark County School District in Nevada.

Also, during the third quarter, the company was selected to receive an $80 million grant from the U.S. Department of Energy (DOE) to expand its electric vehicle manufacturing capabilities and related workforce development efforts. BLBD also upgraded the comprehensive safety of its school buses, offering an unprecedented array of safety systems.

Further, the global automotive growth, accelerated by electrification and resilient demand, offers lucrative growth opportunities for Blue Bird. S&P Global Mobility reported US light vehicle sales of 1.18 million in September 2024. It translates to a seasonally adjusted rate of 16.0 million units, up from the 15.2 million unit reading in August.

Besides, the global electric bus market is projected to grow from $32.15 billion in 2024 to reach around $113.06 billion by 2034, exhibiting growth at a noteworthy CAGR of 13.4% propelled by rising environmentally friendly practices, low consumption of fuel and gasoline, and growing government initiatives. This will further benefit BLBD and accelerate its operations.

Shares of BLBD gained 26.9% over the past six months and 141.8% over the past year to close its last trading session at $45.68. However, the stock declined 8.8% over the past month.

Let’s look at factors that could influence BLBD’s performance in the upcoming months.

Recent Developments

On July 11, BLBD was selected to receive a $80 million grant from the U.S. Department of Energy (DOE) to expand its electric vehicle manufacturing capabilities and connect workforce development endeavors. The financial award will allow BLBD to reinvest in middle Georgia, a previously manufactured high-end motorhomes site, and add a state-of-the-art electric vehicle manufacturing facility.

BLBD will also be able to expand its workforce and invest in a community that is integral to its history and continued success. The conversion will assist BLBD in increasing the production of Type-D electric school buses to meet the rising demand for clean student transportation nationwide. Also, the converted facility will add more than 400 new, good-paying manufacturing jobs.

Also, on June 13, BLBD introduced the most comprehensive safety upgrades to its school buses. BLBA buses will feature an unprecedented array of safety systems to protect school children, bus drivers, and other road users. The company enhanced its safety leadership to help prevent injuries and save lives.

Robust Financials

For the third quarter that ended June 29, 2024, BLBD’s net sales increased 13.3% year-over-year to $333.37 million. Its gross profit grew 51.6% year-over-year to $69.35 million. The company’s operating profit grew 104.5% from the year-ago value to $39.73 million.

Furthermore, the company’s adjusted net income of $30.54 million indicates growth of 110.7% year-over-year. And its adjusted earnings per share came in at $0.91, up 106.8% from the prior year’s quarter. Its adjusted EBITDA rose 62.6% from the year-ago value to $48.25 million.

As of June 29, 2024, BLBD’s total assets stood at $468.07 million, compared to $417.77 million as of September 30, 2023.

Solid Historical Growth

BLBD’s revenue grew at a CAGR of 18.9% over the past three years, while its EBITDA improved at a CAGR of 55.9%. Its EBIT increased at a CAGR of 71.9% over the same period, while the company's net income and EPS grew at respective CAGRs of 92.1% and 80.2% over the same time frame.

Mixed Analyst Estimates

Analysts expect BLBD’s revenue for the fourth quarter (ended September 2024) to come in at $324.30 million, indicating an increase of 7% year-over-year. However, the consensus EPS estimate is expected to decelerate marginally year-over-year to $0.65 over the same period. Moreover, the company has surpassed the consensus revenue and EPS estimates in each of the trailing four quarters.

For the fiscal year (ended September 2024), the company’s revenue and EPS are anticipated to grow 16.6% and 212.8% year-over-year to $1.32 billion and $3.35, respectively. In addition, Street expects its revenue and EPS for the fiscal year (ending September 2025) to grow 10.3% and 10.2% from the prior year to $1.46 billion and $3.69, respectively.

Unfavorable Profitability

BLBD’s trailing-12-month gross profit margin of 18.97% is 40.1% lower than the 31.66% industry average. Its trailing-12-month EBITDA margin of 11.97% is 14.8% lower than the industry average of 14.06%. The stock's trailing-12-month Levered FCF margin of 3.83% is lower than the industry average of 6.57%.

POWR Ratings Reflect Uncertainty

BLBD’s mixed prospects are projected in its POWR Ratings. The stock has an overall rating of C, translating to a Neutral in our proprietary system. The POWR Ratings are calculated by considering 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 a C grade for Momentum. BLBD is currently trading above its 200-day moving average of $42.29 but is trading below its 50-day moving average of $47.94, respectively, indicating a mixed trend.

Also, with a 24-month beta of 1.41, the stock has earned a grade of D for Stability. It also has a D grade for Sentiment, which is in sync with its mixed analyst estimates.

BLBD is ranked #19 among the 53 stocks in the Auto & Vehicle Manufacturers industry.

Beyond what I have stated above, we have also given BLBD grades for Growth, Value, and Quality. Get access to all the BLBD ratings here.

Bottom Line

BLBD is a leading electric and low-emission school bus company, prospering with supportive government grants, solid revenue growth, and continuous expansion of its operations and capacity. Also, with the surging transformation to low-emission vehicles, the company is poised to expand further.

However, the company continues to grapple with high operating expenses and rigid competition from its peers.

Given BLBD’s mixed profitability and uncertain near-term growth prospects, waiting for a better entry point in this stock seems prudent.

Stocks to Consider Instead of Blue Bird Corporation (BLBD)

Given its near-term uncertain prospects, the chances of BLBD outperforming in the coming weeks and months are compromised. However, there are many industry peers with much more impressive POWR Ratings. So, consider these A (Strong Buy) or B (Buy) stocks from the Auto & Vehicle Manufacturers industry instead:

Mercedes-Benz Group AG (MBGAF), Mazda Motor Corporation (MZDAY), and Great Wall Motor Company Limited (GWLLY).

For exploring more A and B-rated auto stocks, click here.

What To Do Next?

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BLBD shares were trading at $45.38 per share on Thursday afternoon, down $0.30 (-0.66%). Year-to-date, BLBD has gained 68.32%, versus a 23.68% rise in the benchmark S&P 500 index during the same period.

Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.

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