Blue Bird Corporation (BLBD), a seasoned player with a century-long presence in the school bus manufacturing arena, is currently on a remarkable trajectory in the stock market. Outshining the auto industry, sector, and the S&P 500, BLBD has notably emerged as the leading auto manufacturer in terms of year-to-date performance.
The firm has ventured into cutting-edge automotive technologies such as alternative fuel and electric vehicle (EV) buses, aligning perfectly with the U.S. government’s initiatives to transition more public schools to EV buses and non-fossil fuel options.
Year-to-Date Price Performance
Blue Bird’s stock has surged by a significant 80% year-to-date, prompting investors to ponder whether there is still more room for growth or if the potential gains have already been factored in. The conundrum remains: should one invest or pocket the profits?
Blue Bird Riding the Wave of Market Opportunity & Federal Grants
The U.S. is witnessing a surge in electric school bus adoption, fueled by substantial government funding aimed at replacing diesel fleets. The Bipartisan Infrastructure Law’s support for the EPA’s Clean School Bus Program, offering $5 billion over five years for zero-emission bus replacements, has set the stage for this transformation. With the majority of U.S. school buses still reliant on diesel, Blue Bird stands in a prime position to capitalize on this immense market opportunity, leveraging government policies and rising demand.
To cater to the escalating demand for zero-emission buses, the company is ramping up its production capacity. Initiatives like the EV Build-up Center in Georgia and the recent $80 million DOE grant to convert a facility into an EV manufacturing plant underscore its commitment to scaling up its annual electric bus production to over 5,000 units. Additionally, BLBD’s strategic partnerships and emphasis on low-emission transportation reinforce its market leadership.
Recently, Blue Bird reached a significant milestone by delivering its 2,000th electric school bus, powered by Cummins’ CMI PowerDrive 7000 system.
BLBD’s Strong Q3 Results & Promising Forecast
Early in August, Blue Bird unveiled robust fiscal third-quarter 2024 results, attributing the success to the growing demand for school buses and EV models. The company surpassed earnings and revenue expectations, with an all-time high adjusted EBITDA of $48 million and a 14.5% margin. Ending the quarter with a 5,200-unit backlog, BLBD raised its revenue outlook significantly, now anticipating revenues of $1.30-1.33 billion for fiscal 2024. The adjusted EBITDA is projected between $170 million and $180 million, showcasing a marked improvement from the earlier forecast. Looking ahead, the company aims for an adjusted EBITDA margin of 15% on revenues nearing $2 billion.
Blue Bird’s operational enhancements, focus on production efficiency, new order growth, and supremacy in alternative-powered buses have paid off. The company rebounded impressively after the pandemic slump, reporting substantial revenue growth in fiscal 2022 and 2023. Analyst estimates for fiscal 2024 and 2025 hint at a year-over-year increase in sales and EPS, underscoring the positive outlook.
Is BLBD Stock Still a Buy?
Despite the stellar YTD returns, it might not be wise to sell Blue Bird shares just yet. The company’s robust fundamentals, coupled with an attractive valuation, indicate that there could be further upside potential in store. With a Zacks Rank #1 (Strong Buy) and a forward 12-month sales multiple lower than the industry average, BLBD presents an appealing investment opportunity.
Wall Street echoes this sentiment, as most analysts covering BLBD rate it as a ‘Strong Buy,’ projecting a substantial upside. With a compelling growth trajectory and promising prospects, accumulating more shares of Blue Bird could lead to significant returns down the road.
