Investors like myself are always on the lookout for compelling turnaround stories, and Blue Bird Corporation (NASDAQ:BLBD) has certainly caught my attention with its impressive execution of a successful turnaround strategy. During the recent fiscal second-quarter earnings call, Blue Bird management couldn’t help but highlight the remarkable progress achieved through their turnaround efforts. With management indicating that the turnaround is ahead of schedule, I believe it’s worth delving deeper into the company to assess its strategic positioning for future growth.
Blue Bird Corporation is a well-known bus manufacturer that specializes in producing buses for various purposes, including school transportation, recreation, and public transit. The company has a rich history, dating back to its founding by Albert L. Luce Sr. in 1932. Since then, Blue Bird has become the leading manufacturer of school buses in North America. Over the years, Blue Bird has expanded its product line to include alternative fuel buses, motorhomes, and specialty vehicles.
The second quarter of fiscal 2023 proved to be a pivotal period for Blue Bird Corporation, especially from a financial performance standpoint. Despite the ongoing challenges posed by the pandemic, the company’s operating performance demonstrated significant improvement, setting a strong foundation for future growth. I was particularly impressed with Blue Bird’s strategic investments, such as reinvesting over $3 million in wage increases for their frontline teammates and implementing operational improvements that included facility upgrades and the establishment of a new EV center.
In terms of financial results, Blue Bird’s performance in the second quarter was truly impressive. The company sold over 2,300 units, which led to record-breaking revenue of $299.8 million, representing a remarkable 44% year-over-year increase. Blue Bird’s backlog also remained robust, with approximately 5,800 units valued at over $775 million in revenue. Notably, the backlog included $200 million in firm orders for 621 electric school buses, indicating a significant uptick attributed to the success of the EPA’s Clean School Bus Program.
Blue Bird’s participation in the EPA Clean School Bus Rebate Program has had a substantial impact on the company’s growth opportunities in both the short and long term. With $5 billion in funding over five years, this program has awarded Blue Bird contracts for over 500 electric buses, which is expected to generate an estimated $200 million in revenue. Looking ahead, Blue Bird anticipates potential revenue exceeding $1 billion throughout the duration of the five-year program.
Despite the supply chain challenges faced by many industries, Blue Bird is confident in maintaining its market position and achieving its targeted bookings, aiming for a 30% market share. The company is well-positioned to capitalize on the increasing demand for school buses, driven by the aging national fleet that requires replacement. Blue Bird’s commitment to alternative-powered buses, especially electric buses, aligns perfectly with the government’s push to electrify the school bus fleet. Moreover, the company’s exclusive partnerships with industry leaders such as Ford Motor Company, ROUSH, and Cummins give Blue Bird a distinct advantage in the market.
The adoption of electric school buses is on the rise, and Blue Bird stands to benefit significantly from this transition. The U.S. Environmental Protection Agency’s Clean School Bus Rebate Program has played a crucial role in accelerating the adoption of electric buses. As of December 2022, there were over 5,600 committed electric school buses, nearly double the number recorded just a few months earlier. Blue Bird has emerged as a dominant player in this market, securing contracts for over 500 electric buses. California leads the way in electric school bus adoption, followed by Maryland, and Blue Bird, together with Thomas Built Buses and The Lion Electric Company, dominates the electric school bus market.
To further solidify its position, Blue Bird is gearing up to unveil its next-generation Vision electric school bus, which boasts enhanced powertrain and battery capabilities. With upgraded battery capacity, longer single-charge range, and reduced charging time, this new model is expected to capture the increasing demand for electric school buses.
Despite the prevailing supply chain challenges, Blue Bird’s strategic market positioning and leadership in alternative-powered buses, including electric buses, give the company a competitive edge. Blue Bird’s ability to meet industry demands, ongoing cost reduction efforts, and focus on quality are all factors that are expected to drive earnings growth in the years to come.
I find Blue Bird Corporation’s turnaround story to be highly compelling. The company’s successful execution of its turnaround strategy and strategic positioning for future growth in the school bus industry make it an appealing investment opportunity. With a positive market outlook, supportive government initiatives, and its leadership in alternative-powered buses, Blue Bird has the potential for substantial earnings growth in the next five years.
