BLBD Q2 Deep Dive: Volatile Tariffs and Operational Gains Drive Blue Bird's Outperformance

School bus company Blue Bird (NASDAQ:BLBD) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 19.4% year on year to $398 million. The company expects the full year’s revenue to be around $1.45 billion, close to analysts’ estimates. Its non-GAAP profit of $1.19 per share was 20.9% above analysts’ consensus estimates.

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StockStory’s Take

Blue Bird’s second quarter saw a significant market response, as strong sales volumes and disciplined operational execution outpaced analyst expectations. Management highlighted that improved product mix, stable bus pricing, and sustained leadership in alternative power vehicles—especially propane and electric models—were primary contributors. CEO John Wyskiel credited the company’s focus on manufacturing efficiency and cost control for the margin performance, noting, “We are less sensitive than in the past to product mix...our gross margins are roughly the same percentage across all powertrain types.” The company also benefited from targeted price increases that more than offset material and labor cost pressures.

Looking forward, Blue Bird’s guidance is anchored by expectations of robust demand for both traditional and alternative fuel buses, ongoing investments in automation, and proactive pricing strategies to neutralize tariff impacts. Management anticipates continued momentum from state subsidies and federal programs supporting electric vehicle (EV) adoption, while cautioning that tariff-related order delays could persist in the near term. CFO Razvan Radulescu stated, “We believe we can navigate this [tariff environment] to a margin-neutral outcome,” and emphasized that stability in pricing through March should help unlock pent-up demand. Blue Bird’s strategy includes expanding product offerings and increasing production capacity to sustain profitable growth.

Key Insights from Management’s Remarks

Management attributed quarterly momentum to strong execution on manufacturing improvements, disciplined pricing, and resilience in alternative fuel segments despite market uncertainty.

• Operational enhancements: Blue Bird’s leadership emphasized ongoing investments in automation and lean manufacturing. These initiatives are designed to drive future margin expansion, with CEO John Wyskiel noting that automation “could reduce our costs and make us even more competitive.”
• Alternative power dominance: The company maintained its leading position in propane and electric buses. Over 61% of units sold were alternative powered, compared to less than 15% for competitors, supporting higher margins and customer loyalty.
• Tariff management: Management described the current tariff environment as volatile but manageable. Blue Bird’s proactive price adjustments and sourcing from North America have limited the negative impact on margins, and the company extended price certainty to customers through March to encourage new orders.
• Product mix resilience: CFO Razvan Radulescu clarified that gross margins are now “roughly the same percentage across all powertrain types,” reducing the company’s historical sensitivity to product mix shifts between diesel, propane, and EV models.
• Capacity expansion: The new Micro Bird plant in New York, a joint venture with Girardin, was launched to double small bus capacity and target the Buy America shuttle bus market. This strategic move is expected to broaden Blue Bird’s addressable market and provide additional revenue streams.

Drivers of Future Performance

Blue Bird’s outlook is driven by anticipated demand for alternative fuel buses, automation investments, and the ability to adapt pricing to offset external cost pressures.

• Stable demand and funding tailwinds: Management expects strong replacement cycles due to aging school bus fleets and continued state and federal funding for EVs, especially through EPA’s Clean School Bus program. Rounds 4 and 5 of funding are still in play, supporting volume visibility into 2026.
• Production efficiency improvements: Planned automation and manufacturing upgrades are aimed at sustaining or improving margins, regardless of changes in product mix. Management believes these initiatives, currently in business case evaluation, could unlock additional margin expansion over the medium term.
• Tariff and material cost risks: While Blue Bird has navigated recent tariff volatility successfully, management cautions that further shifts in global trade policy or material inflation could impact costs. Price adjustments are set to remain a key tool in maintaining profitability, with short-term uncertainty expected to gradually subside as clarity returns to the market.

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be tracking (1) the impact of automation and manufacturing upgrades on operating margins, (2) renewed order activity as price certainty offsets tariff-driven delays, and (3) the scale-up of EV and propane bus sales supported by state and federal incentive programs. Progress on the Micro Bird plant’s ramp-up and the launch of new chassis offerings will also serve as important indicators of Blue Bird’s execution and market positioning.

Blue Bird currently trades at $54.69, up from $44.19 just before the earnings. Is there an opportunity in the stock?Find out in our full research report (it’s free).

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