NAV: Share Loss Implied By Orders Positive for PCAR, Volvo, Daimler

Takeaway: NAV surprised to the upside, but lost 5 points of US and Canada class 8 share in its orders relative to the industry’s. Positive for PCAR.

NAV:  Share Loss Implied By Orders Positive for PCAR, Volvo, Daimler


  • Five Points of “Order Share” Loss YoY:  Navistar reported class 8 orders down 36% in the U.S. and Canada in their fiscal first quarter vs. an ~14% decline for the industry, by our estimates.  Relative to last year’s “order share”, Navistar was down about five percentage points to 14.1%.   
  • ISX Intro Saps 13L:  The small sequential improvement (~50 bps) may relate to the introduction of the Cummins 15L ISX Engine.  Roughly 40% of NAV's class 8 orders in the quarter used the newly introduced Cummins 15L engine, so MaxxForce 13L orders were weak.  That may benefit competitors’ 13L offerings.
  • Major Rally in NAV Shares:  Navistar’s management change, improved operating performance and better than expected liquidity position helped drive its share price higher today.  The stock is heavily shorted, a position we have not advocated because of numerous uncertainties (including a potential takeout). 
  • Long Paccar Easier Position:  Navistar’s emissions problems helped it to gain market share in early 2012, since many customers initially preferred the simpler, less clean EGR engine, in our view.  As Navistar introduces compliant products, pays non-conformance penalties and suffers from poor product perceptions, it may continue to lose significant market share.  NAV's loss in class 8 is PCAR, Daimler and Volvo's gain.  We see NAV’s expectation of improved market share through the year as unlikely, with further market share erosion during 2013 probable.
  • SCR + EGR 13L a Hard Sell:  We expect Navistar to struggle with the introduction of its new 13L engine.  While the 15L ISX is a well-established platform, the previous 13L MaxxForce has experienced serious perception issues. The new 13L, with two emissions technologies in the same engine, may be a non-starter with some customers, in our view.
  • Focus on PCAR:  Our discussion of NAV’s results focuses on the competitive dynamic with PCAR, one of our long ideas.  Please ping us if you have any questions on the specifics of NAV’s earnings report or 10-Q from today.


NAV:  Share Loss Implied By Orders Positive for PCAR, Volvo, Daimler - 1q


Today we bought Nationstar Mortgage Holdings (NSM) at $38.96 a share at 1:10 PM EDT in our Real-Time Alerts. Steiner books the gain in Morgan Stanley (MS) and flips it into NSM. Quarter was solid and the company’s positive outlook/guidance remains unchanged, but the analyst community is souring so we’ll take advantage.



VIDEO: Can JCP Go Bankrupt?


Hedgeye Retail Sector Head Brian McGough appeared on CNBC this afternoon to discuss JCPenney's (JCP) current financial woes and whether or not the company should fire current CEO Ron Johnson. McGough argues that firing Johnson will put the company on the fast track to Chapter 11 bankruptcy.


Go to 6:48 into the video to watch Brian’s interview.

All Quiet On The European Front?

We don’t expect today’s press conference with the European Central Bank (ECB) to have a material impact on the EUR/USD currency pair. While the meeting does suggest bearishness due to a lower 2013 GDP target and downside on CPI outlook, ECB Chair Mario Draghi still has plenty of tricks up his sleeve that can support the Euro. Though the EUR/USD recently broke its TAIL line of support at $1.30, it quickly climbed back to its TREND line of resistance at $1.31. If anything is going to affect the Euro in the coming weeks, it will be the uncertainty over Italy’s next government. We play the Euro through the CurrencyShares Euro Trust ETF (FXE).


All Quiet On The European Front? - EUROUSD

Casual Dining Black Box Update

Black Box Intelligence released same-restaurant sales data for February.  As expected, the data is implying a significant deceleration in comparable sales and traffic trends.



  • SRS fell 5% in February
  • 1Q-to-date trends averaging -2.3%
  • Winter weather comparisons were a negative factor in first two weeks of February
  • The western region (weather not a factor) performed the best: SRS up 2.1%
  • New England performed the worst: SRS -8.9%
  • Traffic declined -6.2% on top of January’s decline of -3.1%.  The rolling 3mo decline in traffic is now -4.2%
  • Average check is running +3.3% in 1Q13, up from 1.6% in September 2012

Casual Dining Black Box Update - black box same restaurant sales


Casual Dining Black Box Update - blackbox average check



Some upcoming catalysts:


JPM, BofA, UBS conferences this week and next


Our favorite names:







Howard Penney

Managing Director


Rory Green

Senior Analyst


March ECB Presser: 2013 GDP Revised Down

The Q&A from today’s ECB press conference revealed that there was “discussion on whether to cut rates but the prevailing consensus was to keep rates unchanged”, leaving the interest rate on the main refinancing operations unchanged at 0.75% along with the interest rates on the marginal lending facility and the deposit facility at 1.50% and 0.00%, respectively.


The real call-out of the meeting is the ECB staff’s projections downward target range revision for Eurozone 2013 GDP to between -0.9% to -0.1% versus December’s estimate of-0.9% to  0.3%. Draghi blamed the revision on the worse-than-expected Q4 print of -0.6% Q/Q due to weak domestic demand and falling exports.   The staff’s 2014 GDP estimate is a very “healthy” range of 0.0% to 2.0%.


The 2013 CPI range was revised to 1.2 – 2% hinting at a more deflationary outlook versus a December estimate of 1.3% – 2.5%.


In his prepared statements, Draghi highlighted recent data that suggests stabilization in 1H 2013 and improvement in 2H 2013. In the Q&A he suggested some positive signs leading to less “fragmentation”:

  • Stronger world demand from exports
  • The ECB’s monetary policy stance will remain accommodative as long as needed
  • Counterparties have so far repaid  €224.8 billion of the net LTROs issued (€500B)
  • Target 2 balances are improving
  • Funding for sovereigns has improved
  • Increased capital flows from the core to the non-core
  • Financial market improvement since July 2012

However when questioned on the difficulty of credit reaching the real economy, especially for small and medium sized enterprises, Draghi had little to say and no specific program in mind to spur lending. Below we show a chart of the weaken credit lines to households and corporations, one piece of evidence of a very clogged environment that should hamper real growth.


March ECB Presser: 2013 GDP Revised Down - z. ecb loans



--Today’s Q&A was packed with questions on the Italian election and how those receiving the most support rejected the fiscal discipline that Draghi advocates. Draghi had this to say:  “markets, despite excitement after the election, have reverted back to where they were before. There’s recognition that these are democratic elections. Much of fiscal adjustment that Italy already went through will now go on auto pilot, and the country has less debt versus 2012 to roll over. You’ve also seen that contagion to other countries is muted, versus the past. This is positive.”


--The question of staggeringly high youth unemployment came up again which Draghi dodged, saying it’s up to the individual countries to provide labor market reforms.


--On the need for a bailout of Cyprus Draghi said that the Eurogroup is discussing this and a statement could perhaps come in the second part of March. He said Cyprus is a small country but transfer risks could be bigger and it’s important for the Cyprus government to take this opportunity to adhere to anti- money laundering legislation.


--On the rumor of the ECB leaving Troika, Draghi called the report “Angst of the week”, and said it was unfounded.


As it relates to the EUR/USD, we don’t think the outcome of today’s meeting will have a huge impact on the currency cross. The meeting does suggest bearishness due to a lower 2013 GDP target and more downside to the CPI outlook. However, Draghi still appears armed to issue policy and leverage the bank where necessary, which should continue to support the cross. We think the real inflections over the next days and weeks will come from the uncertainty over Italy’s next government.


March ECB Presser: 2013 GDP Revised Down - zz. eur usd


Matthew Hedrick

Senior Analyst

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