Navistar (NYSE:NAV)
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Navistar International Corp. (NAV) said the freight industry is taking longer than expected to rebound, as the commercial truck maker slashed its sales outlook for the year and reported 94% reduction in fiscal second-quarter profit.

The company predicted Tuesday that industrywide sales of heavy-duty trucks and buses in the U.S. and Canada would fall to a range 165,000 to 185,000 for the company's fiscal year ending Oct. 31. The forecast is the lowest volume of retail sales since 1962. In March, Navistar estimated 2009 sales would total 210,000 to 225,000 trucks.

A downturn in the global economy has driven down shipping volumes and kept trucking companies from needing to buy new trucks. Navistar competitor Paccar Inc. (PCAR), whose truck brands include Peterbilt and Kenworth, also reported sharply lower quarterly revenue and income in April and rolled back its projections for truck sales.

Navistar Chairman and Chief Executive Daniel Ustian said the continued weakness in the freight industry is holding back truck demand, which has been in a slump since 2007.

"This is clearly one of the toughest markets we've experienced," Ustian said during a conference call with Wall Street analysts. "The industry felt 2009 would be a good year, [but] freight continues to be challenged."

The Illinois-based truck and engine builder slashed its profit guidance for the year to $5.20 a share to $5.50 a share, from $7.55 to $8.05 a share in March. The outlook includes a one-time gain from the company's settlement in January of a dispute with Ford Motor Co. (F) over Navistar's contract to build diesel engines for Ford pickup trucks.

For the quarter ended April 30, Navistar reported earnings of $12 million, or 16 cents a share, down from $211 million, or $2.88 a share, a year earlier. The latest results included a charge of 44 cents a share from the Ford settlement and $45 million in unexpected engine-warranty charges. Revenue in the quarter fell 29% to $2.81 billion. Analysts polled by Thomson Reuters expected per-share earnings, excluding items, of 94 cents on revenue of $3.03 billion.

Gross margin fell to 18.3% from 19% amid plunging sales. Pretax profit from truck-making activities slumped 73% from a year ago. The engine business, meanwhile, swung to a loss.

Ustian said Navistar has been cutting costs and gaining market share. The company's military truck sales, joint ventures with other vehicle makers and other sideline businesses are helping to offset the weakness in the commercial truck market.

On June 4, Navistar completed the purchase of recreational vehicle maker Monaco Coach Corp. for $47 million. The Oregon-based company, which had filed for bankruptcy earlier this year, is expected to contribute $600 million to $1 billion in revenue to Navistar by the end of 2011.

Navistar also noted that the U.S. Pentagon recently increased the anticipated order size for new armored utility trucks for U.S. troops in Afghanistan to as many as 10,000 vehicles from 2,800. Navistar is one of several truck builders competing for a production contract for the vehicle.

"This is significant amount of business for someone, and we know we're in the mix," Ustian said. Navistar expects sales of military trucks to generate at least $2.7 billion in revenue this year.

Navistar's robust sales of trucks to the military in recent years also is helping to drive revenue higher from replacement parts. Revenue from parts sales rose 32% in the quarter.

Navistar stock recently was up 2.14% at $43.96 a share.

-By Bob Tita, Dow Jones Newswires; 312-750-4129; robert.tita@dowjones.com

(Kevin Kingsbury and Mike Barris contributed to this report.)