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Mike Murphy: Navistar Cheap Ahead of EPA Review

Thursday, 8 Mar 2012 | 5:06 PM ET

Down 16 percent over the past month, Navistar shares offered opportunity on Thursday, trader Mike Murphy said.

“They have a big catalyst coming up where we’re expecting EPA certification for their new engines sometime in the next few weeks,” he said on “Fast Money.”

The stock was down on lowered guidance, but Murphy called it cheap at less than 8 times earnings — and he expects the manufacturer of truck engines to contribute significantly to its bottom line.

“They’ll do $5 this year,” he said.

Murphy said he bought Navistar stock at $37.60.

Shares closed at $39.27, down 1.9 percent.

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Trader Stephanie Link wasn’t a buyer.

“I understand the valuation story,” she said. “I think there are just better places to put your money.”

Link said she would sooner look at Wabco or Cummins.

Trader Stephen Weiss liked the stock’s value and bought it for the short-term.

“They’re always cheap for a reason, but it overshoots on the downside, so I think you’ve got some upside into the low $40s,” he said. “I may not be there until then. I’m making money now, as I said.”

Options trader Brian Stutland noted the trucking industry expects growth of 5 to 18 percent for the year.

But even if Navistar were to post EPS of $4, “It’s still a cheap stock at these levels,” he said.

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Trader disclosure: On March 8, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders: Najarian is long AAPL; Najarian is long C; Najarian is long WFC; Najarian is long INTC; Najarian is long YHOO; Najarian is long JOYG; Najarian is long COP; Najarian is long PEP; Najarian is long HPQ; Weiss is short AAPL puts; Weiss is long JPM; Weiss is long GMCR; Weiss is long HPQ; Weiss is long TBF; Weiss is long QCOM; Weiss is long BRCM; Weiss is short FCX; Weiss is short ANR; Stutland Volatility Group is market maker holding hedged positions in VIX futures and options; Stutland is short TLT puts; Stutland is long TIPS; Stutland is GE long stock and short calls; Stutland is NLY short put spread; Stutland is DBA long stock and short calls; Stutland is short DIA puts;

For Willie Williams
No disclosures

For Toni Sacconaghi
Bernstein currently makes a market in the following companies AAPL / Apple Inc, DELL / Dell Inc.

Accounts over which Bernstein and/or their affiliates exercise investment discretion own more than 1% of the outstanding common stock of the following companies HPQ / Hewlett Packard.

For Andy Barish
(MCD) I, Andy Barish, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

For Whitney Tilson
T2 Partners is long HHC

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