DA Davidson sees strong bus industry, backs BLBD stock

Tuesday, bus industry data for February indicated a 38% year-over-year increase in orders, accompanied by a 26% rise in production. Shipments also surged 37% year-to-date. DA Davidson analysts view this as a sign of a resilient market, despite broader economic challenges in North America. The analysts believe this trend is favorable for the bus industry and particularly for Blue Bird Corporation (NASDAQ:BLBD), which they continue to recommend. InvestingPro data shows BLBD’s revenue growing at 10.6% with a healthy P/E ratio of 10.3, suggesting room for further growth.

The uptick in bus orders and shipments comes at a time when the North American economy has faced turbulence, yet the bus market remains robust. According to DA Davidson analysts, the growth is partly due to an aging fleet that requires replacement. Additionally, they note that while one of BLBD’s competitors is catching up on its schedule, contributing to the increased shipments, the overall industry health is positive. According to InvestingPro’s analysis, BLBD maintains strong financial health with a "GREAT" overall score, supported by solid liquidity ratios and efficient capital management.

Blue Bird Corporation’s financial outlook appears promising, with projections of nearly quadrupling its EBITDA between fiscal years 2023 and 2027-2028, and aiming for over 15% EBITDA margins. The company has already nearly reached a 15% margin. DA Davidson analysts recently met with Blue Bird’s new CEO, who suggested there could be further opportunities to improve margins.

The analysts’ positive stance on BLBD stock is reinforced by the company’s ambitious long-term EBITDA goals, which they find attainable. They anticipate that as Blue Bird progresses towards these goals, the significant short interest in the stock will likely diminish. This outlook is based on the company’s current performance and the CEO’s confidence in potential additional margin improvements.

In other recent news, Blue Bird Corporation reported its first-quarter financial results for fiscal year 2025, showcasing a strong performance that exceeded expectations. The company achieved an adjusted earnings per share of approximately $0.92, surpassing the consensus estimate of $0.79, and reported adjusted EBITDA of about $46 million, also above expectations. Blue Bird’s revenue for the quarter reached approximately $314 million, exceeding management’s forecast of $300 million. The company’s financial guidance for fiscal year 2025 remains consistent, with revenue projected between $1.4 billion and $1.5 billion, and an adjusted EBITDA forecast now ranging from $185 million to $215 million.

In terms of analyst ratings, Craig-Hallum, Needham, and BTIG all adjusted their price targets for Blue Bird, with Craig-Hallum setting a target of $68, Needham at $49, and BTIG at $45, while all three firms maintained a Buy rating. These adjustments reflect considerations of uncertainties surrounding federal subsidies for electric vehicles and a more conservative estimate of EV deliveries. Additionally, Blue Bird announced the appointment of John Wyskiel as the new President and CEO, effective February 17, 2025, bringing over three decades of automotive industry experience to the role.

Wyskiel succeeds Phil Horlock, who will continue to serve on the Board to assist with the transition. The company also noted a robust backlog of approximately 4,700 units valued at $760 million, with nearly 1,000 EV units secured for fiscal year 2025. Blue Bird’s leadership change and financial achievements highlight its strategic initiatives and commitment to growth in the electric vehicle market.

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