Blue Bird Corporation is a prominent producer and seller of school buses and related parts, including alternative-powered products such as those fueled by propane, gasoline, and electric power.
Despite the challenges facing the electric vehicle sector, Blue Bird has demonstrated strong performance, significantly boosting its share price and financial outlook.
Recent Performance
Blue Bird has shown remarkable growth, with its second-quarter revenue totaling $345.9 million, marking a 15.4% increase from the previous year. The Bus segment was particularly strong, with revenue rising 16.3% from $273.5 million to roughly $318 million, driven by an 18.8% increase in sales price per unit.
This growth occurred even as the number of units sold fell by 2.2%, highlighting the effectiveness of price adjustments and changes in product and customer mix.
The company’s profitability also saw significant improvements. Net income increased from $7.1 million to $26 million, while operating cash flow more than doubled from $24.8 million to $54.6 million.
Adjusted operating cash flow nearly tripled, reaching $31.1 million, and EBITDA expanded from $21.1 million to $45.8 million.
Guidance and Long-Term Outlook
Encouraged by its strong performance, Blue Bird raised its revenue guidance for the fiscal year. The company now anticipates sales between $1.275 billion and $1.325 billion, up from the previously forecasted $1.15 billion to $1.25 billion.
This represents an 8.3% increase at the midpoint compared to prior guidance and a 14.8% increase over the $1.13 billion generated in 2023. EBITDA is expected to be between $145 million and $165 million, significantly higher than the prior range of $120 million to $140 million.
Looking further ahead, Blue Bird expects to produce around 8,800 buses this year, up from 8,514 in 2023, including approximately 800 fully electric buses. The company projects long-term production to grow to between 11,000 and 12,000 buses annually, with 4,000 to 5,000 of these being electric.
This should lead to substantial revenue growth, with long-term projections of $1.85 billion to $2 billion annually and EBITDA margins increasing to 13.5% to 14%.
Investments and Industry Dynamics
Blue Bird is making significant investments in its business transformation. The company plans to allocate around $240 million in funds this year, based on projected operating cash flow of $158 million.
These funds will be used for research and development, capital expenditures, joint venture investments, share repurchases, boosting cash reserves, and paying down debt.
The broader industry dynamics also favor Blue Bird. During the COVID-19 pandemic, investments in school buses were slashed, but demand is expected to rebound. Approximately 43% of the school bus fleet in North America is 10 years old or older, with some buses being 35 years old.
The number of school buses sold plummeted from 36,100 in 2019 to 25,700 in 2022. This year, the industry is expected to see 33,000 new buses, with projections reaching about 40,500 by 2029.
Government investments in vehicle electrification are also set to benefit Blue Bird. Significant funding across various programs is anticipated, with management estimating that Blue Bird could capture around 30% of these orders, translating to roughly $649.5 million in revenue spread over time.
Valuation
The current valuation reflects the market’s recognition of Blue Bird’s potential. The stock trades at reasonable multiples based on historical results and forward estimates. While not as undervalued as before, the company remains a solid investment with strong growth prospects.
Conclusion
Blue Bird Corporation has demonstrated robust financial performance and has a promising outlook, supported by substantial investments and favorable industry dynamics.
While the stock’s recent appreciation suggests a more modest upside in the near term, the company’s long-term growth potential remains strong.
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Kris is a finance consultant, content marketer, and speaker specializing in helping brands and business owners navigate complex concepts and decisions. Since earning her Finance and Accounting degree, Kris has spent over half a decade writing about financial and technological concerns of brands spanning different life cycles.
