BLBD - Embedded Expectations Analysis - 2018 08 24
Blue Bird Corporation (BLBD:USA) trades near recent averages relative to UAFRS-based (Uniform) Earnings, with an 11.6x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to further compress, and management appears concerned about escalating steel and freight costs, in addition to their ability to sustain strong Q3 performanceSpecifically, management appears concerned about the competitive environment, as well as increases in steel and other commodity prices. Additionally, they may lack confidence in their ability to achieve projected record sales of alternative fuel powered school buses, and to sustain strong Q3 performance in their gasoline bus business. Moreover, they appear concerned that the rapid increase in material and freight costs cannot be fully offset, and they may lack confidence in their ability to drive margin expansion.
Blue Bird is an independent designer and manufacturer of school buses. The company reviews and presents its business in the following operating segments: the Bus segment, whereby the company designs, engineers, manufactures, and sells Type C school buses, Type D school buses, and other buses including school buses that are converted to suit applications required by the United States Government, state and local governments, and various customers for commercial and export markets; and the Parts segment, which provides parts for routine maintenance, replacement of parts that are damaged in service, and replacement of parts that suffer from wear and tear through the life of the vehicle.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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