Blue Bird Corporation (NASDAQ: BLBD) is a leading manufacturer of school buses in the US, with a strong position in the growing market for alternative fuel school buses. The company’s early pivot to propane and electric school buses has given it a competitive edge, and it is well-positioned to benefit from the $5 billion EPA Clean School Bus Program.
Blue Bird ended Q1 FY 2024 with a backlog of 4600 buses, and soon after the quarter ended, the backlog reached 5000 buses. This shows the strong market demand for Blue Bird’s buses. Moreover, Blue Bird sold 206 electric buses in Q1 FY 2024, representing a 124% YoY increase. The company expects to sell around 800 electric school buses in FY 2024, which would be a 47% YoY increase from the 546 electric buses sold in FY 2023.
The EPA Clean School Bus Program aims to distribute $1 billion each year through 2026 in the form of grants and rebates for school districts to invest in electric, propane, and compressed natural gas school buses as well as related charging infrastructure. Blue Bird’s management expects to receive 30% of the ultimate orders.
Blue Bird was the first school bus manufacturer to market electric buses in 1994. In addition, the company was the first to adopt propane buses in 2007. Thanks to this early pivot, 61% of Blue Bird’s unit sales in Q1 FY 2024 were from non-diesel buses, compared to 10-20% for competitors.
The US school bus market is estimated to reach $4.77 billion in 2024 and $6.01 billion by 2029, growing at a CAGR of 4.74% during that period. About 43% or 221 thousand school buses are over 10 years old and should be replaced within the coming 5 years.
Blue Bird’s market share in the US school bus market is 30%, and it is estimated to grow to 40% by 2029 due to its leading position in alternative fuel school buses.
Blue Bird’s adjusted EBITDA margin is expected to grow to 11% in the short term, 11.5-12% in the mid-term, and 12.5% in the long term. Based on the revenue forecast, Blue Bird’s adjusted EBITDA is estimated to reach $300 million in 2029.
Given the strong revenue growth, expanding market share, and improving margins, Blue Bird is a promising investment opportunity. The price target is $103 by 2029, representing 184% upside.
