BLBD Q2 Earnings Call: Tariffs Pressure EV Margins as Blue Bird Maintains Guidance

School bus company Blue Bird (NASDAQ:BLBD) reported Q1 CY2025 results beating Wall Street’s revenue expectations, with sales up 3.7% year on year to $358.9 million. The company’s full-year revenue guidance of $1.45 billion at the midpoint came in 0.9% above analysts’ estimates. Its non-GAAP profit of $0.96 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Blue Bird’s second quarter results reflected ongoing demand for school buses, with management crediting higher average selling prices and a mix shift toward alternative power vehicles as key drivers. CEO John Wyskiel highlighted that the company’s core combustion engine business remained stable, while sales of electric vehicles (EVs) reached a quarterly record. CFO Razvan Radulescu noted operational improvements and strategic cost management contributed to margin performance, though increased investments in headcount and engineering partially offset gains. Management acknowledged the impact of recently implemented tariffs, describing them as an emerging headwind, particularly for EVs, but emphasized that proactive pricing actions and a strong backlog supported operational stability in the quarter.

Looking ahead, Blue Bird’s guidance assumes continued strong demand for school buses and a balanced mix across product lines, but management flagged tariffs and supply chain volatility as significant risks. CFO Razvan Radulescu stated, "We are working with our supply chain partners to find alternative sources in the United States and North America, but this takes time." CEO John Wyskiel explained that the company may intentionally reduce EV production in coming quarters if tariff pressures persist, while substituting orders with internal combustion engine vehicles as needed. Management expects state and federal funding, including rounds of the EPA Clean School Bus Program, to remain supportive, while ongoing pricing adjustments are intended to offset rising input costs and maintain margin targets.

Key Insights from Management’s Remarks

Management identified sustained demand, pricing actions, and a growing alternative power mix as key factors in the quarter, while tariffs and supply chain challenges began to pressure margins and segment mix.

• Alternative power mix growth: Blue Bird reported increased sales of EV and propane-powered buses, maintaining its leadership in alternative power segments. Management cited owner loyalty and exclusive supplier status for propane models as drivers of higher margins and customer retention.
• Pricing adjustments offset cost pressures: The company implemented targeted price increases across product lines, including a 2% tariff-related hike and an additional 2% increase on new orders, to counteract the impact of new tariffs and rising material costs.
• Tariff impact most acute for EVs: Management explained that newly imposed tariffs, especially the 145% rate on certain Chinese imports, significantly increased the cost structure of EVs, prompting Blue Bird to temporarily prioritize internal combustion engine models over EVs until the situation stabilizes.
• Strong industry backlog and funding support: The company ended the quarter with a backlog representing over six months of production and continued to benefit from state and federal funding flows, particularly from the EPA Clean School Bus Program.
• Commercial chassis segment launch: Blue Bird debuted a new commercial chassis designed for propane and EV powertrains, targeting delivery and last-mile fleet customers, with a planned market launch in 2026. Early customer interest and best-in-class features were highlighted as potential growth drivers.

Drivers of Future Performance

Blue Bird’s outlook is shaped by ongoing demand, evolving regulatory dynamics, and the company’s strategic pricing and product mix decisions.

• Tariff-driven product mix shifts: Management stated that if high tariffs on EV components persist, Blue Bird will shift production toward internal combustion engine and propane buses, which are less affected by tariffs, to protect margins and meet customer demand.
• Dependence on government funding: The company’s growth plan relies on continued state and federal subsidies, including expected future rounds of EPA grants. Management noted potential timing uncertainty for these funding programs, which could impact order flow and segment mix.
• Pricing strategy and supply chain adaptation: Blue Bird is proactively increasing prices to offset rising costs from tariffs and inflation, while working with suppliers to find alternative sourcing. Management believes these measures are critical to maintaining EBITDA margin targets, but acknowledged execution risk if material costs rise further or supply chain constraints worsen.

Catalysts in Upcoming Quarters

In the coming quarters, key developments to monitor will include (1) whether Blue Bird can successfully execute price increases without eroding customer demand, (2) how persistent tariff pressures influence the company’s EV production and segment mix, and (3) the pace of EPA Clean School Bus Program funding rounds and their effect on order intake. Strategic progress in launching the commercial chassis product and sourcing alternatives to tariff-impacted components will also be key milestones.

Blue Bird currently trades at a forward P/E ratio of 9.8×. In the wake of earnings, is it a buy or sell? Find out in our full research report (it’s free).

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