Blue Bird (BLBD)

School bus company Blue Bird (NASDAQ:BLBD) reported Q2 CY2025 results topping the market’s revenue expectations, with sales up 19.4% year on year to $398 million. The company expects the full year’s revenue to be around $1.45 billion, close to analysts’ estimates. Its non-GAAP profit of $1.19 per share was 20.9% above analysts’ consensus estimates.

Company Overview

With around a century of experience, Blue Bird (NASDAQ:BLBD) is a manufacturer of school buses and complementary parts.

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Competitors offering similar products include Lion Electric (NYSE:LEV), IC Bus (NYSE:NAV), and Thomas Built Buses (FRA:DAI).

A company’s long-term sales performance can indicate its overall quality. Any business can have short-term success, but a top-tier one grows for years. Luckily, Blue Bird’s sales grew at a decent 8.6% compounded annual growth rate over the last five years. Its growth was slightly above the average industrials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Blue Bird’s annualized revenue growth of 14.3% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Blue Bird’s recent performance shows it’s one of the better Heavy Transportation Equipment businesses as many of its peers faced declining sales because of cyclical headwinds.

We can better understand the company’s revenue dynamics by analyzing its number of units sold, which reached 2,467 in the latest quarter. Over the last two years, Blue Bird’s units sold averaged 5.7% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases.

This quarter, Blue Bird reported year-on-year revenue growth of 19.4%, and its $398 million of revenue exceeded Wall Street’s estimates by 5.5%.

Looking ahead, sell-side analysts expect revenue to grow 8.4% over the next 12 months, a deceleration versus the last two years. Despite the slowdown, this projection is above average for the sector and implies the market sees some success for its newer products and services.

Blue Bird has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 14.1% gross margin over the last five years. That means Blue Bird paid its suppliers a lot of money ($85.89 for every $100 in revenue) to run its business.

In Q2, Blue Bird produced a 21.6% gross profit margin, in line with the same quarter last year. On a wider time horizon, the company’s full-year margin has remained steady over the past four quarters, suggesting its input costs (such as raw materials and manufacturing expenses) have been stable and it isn’t under pressure to lower prices.

Blue Bird was profitable over the last five years but held back by its large cost base. Its average operating margin of 5.4% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Blue Bird’s operating margin rose by 7.1 percentage points over the last five years, as its sales growth gave it immense operating leverage.

In Q2, Blue Bird generated an operating margin profit margin of 12.6%, in line with the same quarter last year. This indicates the company’s cost structure has recently been stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Blue Bird’s EPS grew at an astounding 29.1% compounded annual growth rate over the last five years, higher than its 8.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

We can take a deeper look into Blue Bird’s earnings quality to better understand the drivers of its performance. As we mentioned earlier, Blue Bird’s operating margin was flat this quarter but expanded by 7.1 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; interest expenses and taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Blue Bird, its two-year annual EPS growth of 317% was higher than its five-year trend. We love it when earnings growth accelerates, especially when it accelerates off an already high base.

In Q2, Blue Bird reported adjusted EPS at $1.19, up from $0.91 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Blue Bird’s full-year EPS of $3.84 to grow 8.1%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Blue Bird has shown mediocre cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.3%, subpar for an industrials business.

Taking a step back, an encouraging sign is that Blue Bird’s margin expanded by 3 percentage points during that time. We have no doubt shareholders would like to continue seeing its cash conversion rise as it gives the company more optionality.

Blue Bird’s free cash flow clocked in at $52.32 million in Q2, equivalent to a 13.1% margin. Its cash flow turned positive after being negative in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Blue Bird’s five-year average ROIC was 39%, placing it among the best industrials companies. This illustrates its management team’s ability to invest in highly profitable ventures and produce tangible results for shareholders.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Fortunately, Blue Bird’s ROIC has increased significantly over the last few years. This is a great sign when paired with its already strong returns. It could suggest its competitive advantage or profitable growth opportunities are expanding.

Businesses that maintain a cash surplus face reduced bankruptcy risk.

Blue Bird is a profitable, well-capitalized company with $173.1 million of cash and $91.49 million of debt on its balance sheet. This $81.57 million net cash position is 5.9% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We were impressed by how significantly Blue Bird blew past analysts’ sales volume, revenue, EPS, and EBITDA expectations this quarter. We were also excited its full-year EBITDA guidance outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 4.1% to $46 immediately after reporting.

Updated: November 13, 2025 at 10:11 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Blue Bird.

Blue Bird is an amazing business ranking highly on our list. First of all, the company’s revenue growth was good over the last five years. And while its low gross margins indicate some combination of competitive pressures and high production costs, its expanding operating margin shows the business has become more efficient. On top of that, Blue Bird’s astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

Blue Bird’s P/E ratio based on the next 12 months is 12.6x. Analyzing the industrials landscape today, Blue Bird’s positive attributes shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $62.38 on the company (compared to the current share price of $51.89), implying they see 20.2% upside in buying Blue Bird in the short term.