One stock off to the races this year is truck and bus maker Navistar International (NYSE: NAV). Its shares were up 44% after the first three days of trading this year, including trading higher on days the market was lower. And the stock is up 62% since the day before Christmas.
What's behind the move?
Monday morning the company said it expected earnings for fiscal 2009 to range between $5.10 and $5.60 per share, which is significantly below the $6.08 the Street was expecting (though the company's forecast includes up to $3 per share in pension costs).
Perhaps someone figured out that with the stock in the low $20s and earnings slated to be above $5 per share, the P/E ratio was pretty low and the stock at that low level was too enticing to pass up.
More likely, though, the move can be attributed to comments from CEO Daniel Ustian, who said that he believed that 2010, rather than being a trough year, will be a lot higher than 2009. The company said it sees a (very) slight gain in sales volume in the United States and Canada this year of its school buses and heavy-duty trucks to 244,000 to 256,000 from 244,100 in fiscal 2008.
So it appears the tide is turning for Navistar.
Last week, the shares jumped even as it posted a wider fourth-quarter loss compared to a year ago, as the results exceeded analysts' expectations. Navistar also said it shifted sales teams and cut staff late last year in a bid to offset weak volumes.
The company said it can gain market share by introducing more efficient engines and expanding its presence in the military truck market, where it said it wins more than 80% of the military contracts in which it bids.
Other positives for Navistar include falling diesel prices and aging fleets, which it believes may support truck demand. And it's pushing for legislation that would bring diesel prices down to the level of gasoline (diesel prices are as much as $1 higher than gas).
The company also said it believes that dramatic commodity price increases are probably not going to happen in 2009, and opportunities exist with foreign militaries.
So what to do now?
If I were up 44% on a stock in a matter of days in this lousy market, I'd look to lock in profits. The economy remains a cause for concern for individuals and for the corporations and municipalities that buy Navistar products.
Mr. Ustian said it himself: "The only people buying trucks are the stronger companies -- the larger fleets [are] buying trucks. The small guy is not buying. He can't get money."
Even the Federal Reserve said yesterday that the recession could be longer and deeper than previously thought.
Navistar is a good company to be sure, but I would not chase the stock at these prices. Wait for the pullback that is sure to come.