After a 40% fall since Feb. 19 of this year, at the current price of around $12 per share, we believe Blue Bird Corp’s stock (NASDAQ: BLBD) has a moderate upside. Blue Bird’s stock has fallen from $19 to $12 since Feb. 19. The Fed’s multi-billion dollar stimulus package announced on March 23rd didn’t raise the stock’s sentiments. Blue Bird, designs and manufacturers school buses, and has been impacted by the coronavirus pandemic as schools were shut down. The company saw sales volume fall by 43% in Q3 2020 (ended June 2020).
The stock currently is 40% below the levels at which it was at the end of 2017 and is still 50% below the pre-Covid (February 2020) high of $23. Currently, we believe that the company’s stock has moderate upside left, as there is no clarity with regards to the abatement of the crisis. Our dashboard What Factors Drove -41% Change In Blue Bird Corp Stock Between 2017 And Now? has the underlying numbers.
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Blue Bird’s revenues increased from $991 million in 2017 to $1,019 million in 2019. Net income margin rose from 1.9% in 2017 to 2.4% in 2019, as the Net Income improved by 32% in the period from $18 million to $24 million. On a per share basis, earnings increased by 16% from $0.79 in 2017 to $0.92 in 2019 as the shares outstanding increased by 13%.
The stock price increased during this period as revenue and profits grew. The P/E multiple was flat at 25x from 2017 to 2019. The multiple went down amid the coronavirus pandemic and school shutdowns and currently stands at 13x. There could be an upside in Blue Bird’s multiple, when compared to levels seen in the past years – P/E of 25x at end of 2019 and P/E of 16x in 2018.
Effect of Coronavirus
The global spread of coronavirus has led to lockdown in various cities across the globe, which has affected industrial and economic activity. This is likely to adversely affect consumption and consumer spending. Blue Bird’s stock is down by about 40% since January 31, after the World Health Organization (WHO) declared a global health emergency in light of the spread of coronavirus. However, during the same period, the S&P 500 index was up 5%. Due to the coronavirus pandemic the company saw a 12% fall in Total revenues for the first three quarters of FY 2020 (FY ends in September). Earnings for the first three quarters fell to $0.01 from $0.48 in the same period of the previous year. Sales volume fell 18% compared to the same period in the previous year. Their were some silver linings in Q3 as the company improved profits by $2.3 million due to Transformational initiatives and the average selling price of the buses also went up by 9%.
In the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to bolster market expectations. Following the Fed stimulus — which helped to set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view, with investors focusing their attention on 2021 results.
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