Blue Bird (BLBD) Stock Forecast & Price Target

Blue Bird Corp has demonstrated strong financial performance, highlighted by an improvement in gross margins, which increased to approximately 21.4%, reflecting a sequential and year-over-year growth. The positive outlook is further supported by projected EBITDA margin expansion from around 15% in FY2025 to 16% by FY2027, indicating operational efficiency and a favorable product mix. Additionally, ongoing revenue growth is anticipated, driven by increased bus sales and the strategic shift towards alternative-powered buses, which is expected to enhance both margins and free cash flow over the coming years.

Blue Bird Corp faces a challenging financial outlook due to several fundamental factors impacting its operations, particularly a decline in the share of powered buses in the delivery mix, dropping to approximately 48% from 54% in the previous quarter. Additionally, the company's EBITDA margins are projected to contract significantly, with forecasts suggesting a decline from 13.6% in fiscal year 2024 to the mid- to high-single-digit range by fiscal year 2026, while long-term targets have been revised lower. Moreover, a substantial year-over-year decrease in backlog units, down roughly 35%, highlights potential challenges in meeting future demand and underlines the risk of not achieving management’s growth targets, coupled with ongoing issues such as labor pressures and reliance on a limited number of suppliers.