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VIEWS: 1,945 PAGES: 3

									                                                                                           Flash Note
                                                                                           June 22, 2012




  Navistar International Corp.                                                             Buy
  Navistar Announces Poison Pill                                                           NAV
                                                                                           Price $26.45
  Our Call
  Navistar's recently announced poison pill likely only delays the potential               Price Target $50.00
  shareholder call for management change. With two large activists holding
  nearly 25% of the company's shares, and share performance down so much on
                                                                                           Services & Equipment
  management credibility, we don't view it as difficult for other shareholders to
  decide to vote as a bloc as the next opportunity to change the makeup of the board.      Jeffrey A. Kauffman
  ■ Navistar Announces Adoption of Poison Pill. Navistar announced that its                (212) 338-4765
    Board of Directors has adopted a Shareholder Rights Plan (the "Plan").                 jkauffman@sterneagee.com
    According to Navistar, the plan is designed to deter coercive takeover tactics         Sal Vitale
    including the accumulation of shares in the open market or through private             (212) 338-4766
    transactions, and to prevent an acquiror from gaining control of the company           svitale@sterneagee.com
    without offering a far price to shareholders. The poison pill will be effective June   Ryan Mueller
    29th and will expire on June 18, 2013.                                                 (212) 338-4732
  ■ Poison Pill Seems Standard - Would Dilute Equity Stake of a Hostile                    rmueller@sterneagee.com
    Acquiror By Close To 90%. Pursuant to the plan, Navistar will distribute one
    preferred stock purchase right to each share of common stock on June 29th. Each        Company Data
    right will entitle the holder to buy a unit representing one one-thousandth of a       52-Week Range               $20.21 - $58.50
    share of a new series of preferred stock for $140 in the event the ownership stake     Market Capitalization (M)         $1,945.4
                                                                                           Shares Outstanding (M)                 68.5
    of any acquiror exceeds 15%. In such an event, the right holders (other than those     Avg. Daily Vol. (000)               1,807.0
    rights held by the acquiror) would be entitled to exercise each right for $140 and
    receive NAV common stock with a value of twice the $140, or $280. At NAV's
    closing price yesterday of $28.38, this would work out to an issuance of close to
    10 shares of common stock for each exercisable right. This would have the effect
    of diluting the equity stake of an acquiror with a 15% stake by close to 90%.
  ■ What This Means? - NAV Management Sees The Writing On The Wall,
    And Is Taking Steps To Thwart a Hostile Bid. This does not come as a surprise
    given the din of takeover talk in the two weeks since NAV reported disappointing
    results. Activist investor Carl Icahn recently increased his stake from 9.9% to
    11.9%, and just last week MHR Fund Management disclosed that it has a 13.6%
    stake. In addition, according to the Financial Times Deutscheland last week,
    Volkswagen indicated it would be interested in acquiring Navistar, and Fiat
    chairman Sergio Marchionne indicated Fiat would be interested in acquiring a
    truck manufacturer. Based on all this activity, NAV's Board is cognizant that:
    (1) a push for either management change, a sale of the company, or pressure to
    change course on Navistar's troubled EGR engine strategy is imminent from the
    activist funds that have recently taken or increased their stakes; and (2) there is
    an elevated chance of a hostile bid. The poison pill, in our opinion, is merely a
    move to buy management time.




   Important Disclosures regarding Price Target Risks, Valuation Methodology, Regulation Analyst Certification,
Investment Banking, Ratings Definitions, and potential conflicts of interest begin on Page I of the Appendix Section.
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                                   Sterne, Agee & Leach Inc. is Member NYSE, FINRA, SIPC
                                                                                                                           June 22, 2012


                                                      APPENDIX SECTION
Company Description:
Navistar International Corporation manufactures and markets medium and heavy trucks, school buses, mid-range diesel engines, and
service parts. Navistar also provides financial services to manufacturers, dealers and customers.

IMPORTANT DISCLOSURES:
Regulation Analyst Certification:
I, Jeffrey A. Kauffman, Sal Vitale and Ryan Mueller, hereby certify the views expressed in this research report accurately reflect my
personal views about the subject security(ies) or issuer(s). I further certify that no part of my compensation was, is, or will be, directly
or indirectly, related to the specific recommendations or views expressed by me in this report.

Research Disclosures:
Sterne, Agee & Leach, Inc. makes a market in the following subject company Navistar International Corp..
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach,
Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company
and/or companies in the next three months.

Price Target Risks & Related Risk Factors:
Investment risks associated with the achievement of the price target include, but are not limited to, a company's failure to achieve
Sterne, Agee & Leach, Inc., earnings and revenue estimates; unforeseen macroeconomic and/or industry events that adversely affect
demand for a company's products or services; product obsolescence; changes in investor sentiment regarding the specific company or
industry; intense and rapidly changing competitive pressures; the continuing development of industry standards; the company's ability
to recruit and retain competent personnel; and adverse market conditions. For a complete discussion of the risk factors that could
affect the market price of a company's shares, refer to the most recent Form 10-Q or 10-K that a company has filed with the Securities
Exchange Commission.
Company Specific Risks:
Risks to our investment thesis and price target for Navistar include: 1) weaker than expected orders for Class 8 Trucks if the economic
downturn persists longer than expected; 2) weaker than expected demand for light and medium trucks from the emerging markets; 3)
higher than expected non-performing loans and charge-offs in the finance business; 4) potential market-share loss in the 15L engine
business acquired from CAT if NAV's new engine is not EPA compliant and the company is not able to use emissions credits from smaller
engines to allow a successful launch of this product; and 5) potential volatility in Defense spending, as well as the awarding of contracts.

Valuation Methodology:
Methodology for assigning ratings and target prices includes qualitative and quantitative factors including an assessment of industry
size, structure, business trends and overall attractiveness; management effectiveness; competition; visibility; financial condition; and
expected total return, among other factors. These factors are subject to change depending on overall economic conditions or industry
or company-specific occurrences. Sterne, Agee & Leach, Inc., analysts base valuations on a combination of forward looking earnings
multiples, price-to-revenue multiples, and enterprise-value-to-revenue ratios. Sterne, Agee & Leach, Inc., believes this accurately reflects
the strong absolute value of earnings, the strong earnings growth rate, the inherent profitability, and adjusted balance sheet factors.
Additional company-specific valuation methodology is available through Sterne, Agee & Leach, Inc.

Company Specific Valuation:
Our price target of $50 is based on a 13x PE multiple and our FY2013 EPS, discounted by a larger than normal 25% to account for
uncertainty in our forecast. We believe Navistar's streamlined cost base, revised product portfolio, stable defense segment, and multiple
high-growth joint ventures will likely enable the company to deliver substantial growth during the cyclical recovery in the truck industry.
Navistar has successfully managed to maintain operations at a higher level of profitability during the cyclical downturn.

Definition of Investment Ratings:
BUY: We expect this stock to outperform the industry over the next 12 months.
NEUTRAL: We expect this stock to perform in line with the industry over the next 12 months.
UNDERPERFORM: We expect this stock to underperform the industry over the next 12 months.
RESTRICTED: Restricted list requirements preclude comment.


                                                                                                            Appendix Section, Page I
                                                                                                                          June 22, 2012

Ratings Distribution:
                                                                                                       IB Serv./ Past 12Mos.
Rating Category                       Count                     Percent                  Count                    Percent
Buy                                   237                       50.75%                   13                       5.49%
Neutral                               204                       43.68%                   7                        3.43%
Underperform                          26                        5.57%                    0                        0.00%

ADDITIONAL INFORMATION AVAILABLE UPON REQUEST: Contact Robert Hoehn at 1-212-338-4731.
Other Disclosures:
Opinions expressed are our present opinions only. This material is based upon information that we consider reliable, but we do not
represent that it is accurate or complete, and it should not be relied upon as such. Sterne, Agee & Leach, Inc., its affiliates, or one or
more of its officers, employees, or consultants may, at times, have long or short or options positions in the securities mentioned herein
and may act as principal or agent to buy or sell such securities.
Copyright © 2012 Sterne, Agee & Leach, Inc. All Rights Reserved.




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(205) 949-3689.




                                                                                                         Appendix Section, Page II

								
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