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Blue Bird Corp Updates 3 Key Risk Factors
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Blue Bird Corp Updates 3 Key Risk Factors

Blue Bird Corp. (BLBD) recently reported lower than expected fourth-quarter performance on both its revenue and earnings fronts amid supply chain disruptions. BLBD is an American bus manufacturer headquartered in Fort Valley, Georgia, and its best known for manufacturing school buses.

The company’s Q4 revenue decreased 31.7% year-over-year to $192.2 million, missing analysts’ estimates by $50.3 million. Earnings per share at $0.07 missed estimates by $0.11. Supply chain constraints led to delays to fiscal 2022 in more than 2,000 bookings.

Management noted that despite a rebound in the school bus industry coupled with 9,700 new bus orders during the year, production was limited due to supply chain bottlenecks.

Consequently, the company has a substantial backlog of over 4,200 buses, including internal combustion engine buses as well as electric buses. EV stocks remain a key attention area for retail investors, and the company is increasing its focus on the EV business.

BLBD has also upped its vehicle prices by 11% to mitigate higher commodity prices. With these developments in mind, let us take a look at the changes in BLBD’s key risk factors that investors should know.

Risk Factors

According to the TipRanks Risk Factors tool, Blue Bird’s top two risk categories are Production and Finance & Corporate, contributing 32% and 22% to the total 37 risks identified, respectively.

Compared to a sector average of 19%, BLBD’s Production risk factor is at 32%. In its recent annual report, the company has changed three key risk factors. The first two of these risks fall under the Finance & Corporate risk category.

BLBD noted that it has reserved its common shares for current and future issuance. Such an issuance would result in ownership dilution for existing investors. On December 15, the company raised $75 million through a private placement of about 4.69 million shares at $16 per share.

Similarly, BLBD conceded that it does not intend to pay cash dividends on its common shares at present. As a result, investors’ ability to generate returns on their investment in the company’s shares will hinge on appreciation in BLBD’s share price.

Meanwhile, under the Production risk category, BLBD highlighted that its defined benefit pension plan is currently underfunded. Future funding requirements could increase substantially due to a reduction in funded status. In such a scenario, BLBD would have to contribute more funds, which could adversely impact its cash flows.

Wall Street’s Take

On December 16, Craig-Hallum analyst Eric Stine reiterated a Buy rating on the stock and increased the price target to $135 from $125.

Consensus on the Street is a Moderate Buy based on 1 Buy and Hold each. The average Blue Bird Corp price target of $19 implies a potential upside of 28.9%. However, shares are down 17.5% so far this year.

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