Truck and engine maker Navistar International Corp reported a smaller quarterly loss as truck sales improved and warranty expenses fell as the company phases out its redesigned engine that failed to meet regulatory standards.

Navistar has developed a new fuel-efficient engine after its previous design failed to reduce greenhouse gas emissions by 90 percent and ran up warranty expenses over the past two years.

“The (new) engines have been selling since last year and have been performing better (than the older engines),” Longbow Research analyst Neil Frohnapple said.

Navistar is also benefiting from strengthening North America demand for trucks and truck parts as customers shift away from more expensive modes to transport freight.

Trucking represents about 68.5 percent of tonnage carried by all modes of domestic freight transportation in the United States, according to the American Trucking Association.

The seasonally adjusted for-hire truck tonnage index rose 1.5 percent in April, after rising 0.6 percent the previous month, the Association said.

“The North America (trucking) industry has grown beyond our initial forecast for the year,” Navistar Chief Executive Troy Clarke said on a conference call with analysts.

Falling Warranity Costs

Navistar said its warranty expenses fell 13 percent in the second quarter ended April 30.

“This declining trend (in warranty costs) is sustainable going forward,” said Chief Operating Officer Jack Allen.

Baird Equity Research analyst David Leiker said Navistar’s warranty costs in the quarter were the lowest in nearly two years.

Net loss attributable to Navistar narrowed to $297 million, or $3.65 per share, from $374 million, or $4.65 per share, a year earlier.

Revenue rose 9 percent to $2.75 billion.

Analysts on average had expected revenue of $2.72 billion, according to Thomson Reuters I/B/E/S.

Navistar’s financial performance is expected to improve in the third and fourth quarters from the preceding quarters, CEO Troy Clarke said in a statement. The company did not forecast any figures for revenue and net loss.

Analysts on average were expecting a loss of $4.26 per share on revenue of $11.29 billion for the year. (Reuters)