Video Summary: CEO bets NFI Group will shift back into high gear

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As markets tanked on Friday, the shares of  NFI Group (NFI) rode higher. Here is the video summary of the INK Research August 19th INK Morning report where we suggested that based on our signals that NFI Group shares may be set to reverse their slide. Yield hunters take note, as the stock currently sports a 6.2% prospective annual dividend yield.

Script (check against delivery):

For the past year, it has been a downhill ride for shareholders of global bus-maker NFI Group, formerly known as New Flyer Industries. The stock is off about 50% as the company experienced production delays leading management to revise its guidance downwards for deliveries first in the spring and subsequently on July 16th. That latest news sent the stock tumbling more than 10% on the day.

Production concerns are overshadowing growth potential associated with NFI's Q2 purchase of UK-based double-decker bus maker Alexander Dennis Limited (ADL).

A fall in Q2 earnings has not helped matters. EPS fell to 14 US cents from 81 cents in Q2 2018. Production inefficiencies were a key factors. Financing-related costs have also been on the rise as the company increased its long-term debt to help fund its ADL acquisition. We note that based on company filings, the debt facility extends to 2023 and interest expense could potentially fall a bit if short-term interest rates head lower.  

In terms of those operating issues, CEO Paul Soubry said this month, "We know the issues that need to be addressed and are focused on recovering to improve deliveries in the second half of 2019." The CEO has been backing his words with share purchases in the public market. That is a positive sign.

Our report which is not a recommendation to buy or sell securities is available through INKResearch.com or the Canadian Insider Club.  Good luck friends and thanks for listening!

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