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Deutsche Bank Starts Navistar (NAV) with a Buy, Sees 41% Upside

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June 5, 2009 9:31 AM EDT

Deutsche Bank initiates coverage on Navistar International (NYSE: NAV) with a Buy rating and $57 price target, which implies 41% upside from current levels.

The firm said, "Navistar currently trades at 7.0x and 4.0x our 2010 and 2011 estimates ($5.70 and $10.00 for 2010 and 2011, respectively), which compares with valuations of 13x+ for Navistar’s global competitors, and historical average multiples for commercial truck producers in the 15x trend earnings range. We see this valuation as compelling; particularly given potential for upside to our $10.00 EPS estimate for 2011."

The firm said the valuation discount could narrow over the next 6-12 months.

The firm said their estimates do not incorporate potential upside from multiple sources, including: 1) Upside from additional military revenue. A dual sourced MRAP ATV contract could alone add $1.45 to our EPS estimates. 2) Upside to our conservative Class 8 market share assumptions, which is 26% for 2010 and 2011. (Every 1% of additional share would add $0.57 to EPS) 3) 2009 and 2010 Class 8 market forecasts are below consensus. Every 10,000 of additional U.S. Class 8 demand would add $0.65 to estimates.

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