Needham cuts Blue Bird stock target to $49, maintains Buy

On Thursday, Needham analysts adjusted their outlook on Blue Bird Corp (NASDAQ:BLBD), a manufacturer of school buses, by lowering the price target to $49 from the previous $66, while still maintaining a Buy rating on the company’s shares. According to InvestingPro data, the stock has experienced significant volatility, with a 26% decline over the past six months despite maintaining strong financial health metrics.

Chris Pierce from Needham cited a cautious approach due to uncertainties surrounding federal subsidies for electric vehicles (EVs). The revised target price reflects a more conservative estimate of EV school bus deliveries, which now falls below the guidance provided by Blue Bird Corp. Despite the reduction, the firm’s stance on the stock remains positive, supported by Blue Bird’s solid fundamentals, including a healthy current ratio of 1.37 and strong return on assets of 22.4%.

Blue Bird has been performing well, with mid-teen adjusted EBITDA margins, an improvement from the high single digits seen previously. This performance comes amid a recovery in industry unit sales and the potential boost from EV school bus sales. However, the slow uptake of subsidized EV units, which accounted for only 6% of total units in the first quarter, has led to a compression in the company’s trading multiple.

Needham’s new price target is based on an 8x multiple of the forecasted fiscal year 2026 adjusted EBITDA, a decrease from the prior multiple of 10x. The firm believes that this new target presents an attractive risk/reward scenario, considering Blue Bird’s historical trading multiples. Furthermore, the target gives minimal credit to the company for potential growth in EV unit sales and further margin expansion in the future.

In other recent news, Blue Bird Corp’s first-quarter fiscal year 2025 financial performance showcased adjusted earnings per share (EPS) of approximately $0.92, surpassing the consensus estimate of roughly $0.92. The company’s adjusted EBITDA also exceeded expectations at about $46 million. Blue Bird delivered approximately 2.13 thousand buses during the quarter, leading to revenues of roughly $314 million. Analyst firm BTIG revised the price target for Blue Bird shares to $45.00, maintaining a Buy rating on the stock.

In other recent developments, John Wyskiel has been appointed as the new President and CEO of Blue Bird Corp. Wyskiel brings over three decades of experience in the automotive industry to his new role. He is set to lead Blue Bird’s strategic initiatives and drive profitable growth.

Blue Bird Corp also reported a record fiscal year for 2024, with a 6% increase in bus sales and a 19% rise in sales revenue. The company’s adjusted EBITDA more than doubled from the previous year to $183 million. The company’s electric vehicle (EV) sales showed a substantial growth, marking a 30% increase year-over-year.

Finally, Craig-Hallum raised the stock’s price target for Blue Bird to $71 from $68, maintaining a Buy rating. The firm highlighted a strong finish to the fiscal year 2024 and expects this positive trend to continue into fiscal year 2025.

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