Blue Bird's Earnings Surge and Electric Bus Expansion Signal a Transformative Growth Phase

Blue Bird Corporation (NASDAQ: BLBD) has emerged as a pivotal player in the electric school bus (EV) sector, leveraging its strong internal combustion engine (ICE) business to fund a strategic pivot toward electrification. The company's Q2 2025 earnings report, released on May 7, 2025, underscores its dual-track approach: maintaining profitability in its core ICE segment while accelerating EV adoption. With net sales of $358.9 million and adjusted EBITDA of $49.2 million (14% margin), Blue Bird reaffirmed its full-year guidance of $200 million in adjusted EBITDA and $1.4–$1.5 billion in revenue. This performance, coupled with a record 265 electric buses delivered in Q2, signals a transformative phase for the company.

Strategic Positioning: Balancing ICE and EV Growth

Blue Bird's current financial strength is rooted in its ICE business, which accounted for 88% of Q2 unit sales. The ICE segment's 14% adjusted EBITDA margin highlights its role as a cash-generating engine, enabling reinvestment in EV development. This is critical in a market where electrification remains capital-intensive. The company's ability to maintain pricing power—driven by a 2.8% increase in average sales price per unit—further strengthens its balance sheet, providing flexibility to navigate EV-related challenges such as supply chain bottlenecks and regulatory uncertainties.

Meanwhile, the EV segment is gaining traction. Blue Bird delivered 265 electric buses in Q2, a 11.5% share of total unit sales, and reported a backlog of 708 EV units ($233 million in revenue). This momentum is supported by government incentives like the EPA's Clean School Bus Program, which has spurred demand for zero-emission fleets. The company's 1,100 EVs sold or in backlog since 2024 position it to capture a growing share of the $22.92 billion global electric school bus market, projected to grow at a 13.83% CAGR through 2034.

Competitive Landscape: Navigating a Crowded Market

The EV school bus sector is highly competitive, with key players including Thomas Built Buses, BYD, and Lion Electric. Blue Bird's differentiation lies in its dual expertise: it combines the operational efficiency of its ICE business with a vertically integrated EV strategy. For instance, its Saf-T-Liner C2 Jouley model, powered by Cummins' 14Xe eAxle, offers a proven platform for electrification. This contrasts with competitors like BYD, which rely on third-party battery suppliers, potentially exposing them to supply chain risks.

However, Blue Bird faces headwinds. A 145% tariff on Chinese components has forced it to pause price reductions for EVs, squeezing margins. Additionally, the timing of future EPA funding rounds remains uncertain, which could delay school districts' adoption of electric buses. Despite these challenges, Blue Bird's 4,900-unit order backlog ($770 million in revenue) provides visibility for near-term growth, while its $274 million in liquidity ensures financial resilience.

Long-Term Shareholder Value: A Path to $2 Billion in Revenue

Blue Bird's long-term strategy hinges on scaling its EV segment to achieve an adjusted EBITDA margin of 15%+ on $2 billion in revenue. This ambition is feasible given the market's trajectory: the U.S. alone is expected to grow at a 4.74% CAGR through 2033, driven by environmental regulations and public health concerns. Blue Bird's recent introduction of a new commercial chassis at the Work Truck Show signals its intent to expand beyond school buses into broader commercial EV markets, diversifying revenue streams.

Investors should also note the company's disciplined capital allocation. In Q2 2025, Blue Bird repurchased $20 million in shares and reduced debt by $5 million over the past year. These actions, combined with a $131 million cash reserve, demonstrate management's commitment to maximizing shareholder returns.

Investment Implications

Blue Bird's earnings surge and EV expansion present a compelling case for long-term investors. While short-term risks—such as tariffs and regulatory delays—exist, the company's strong ICE margins, robust order backlog, and strategic R&D investments position it to capitalize on the $73.88 billion global EV school bus market by 2034. The stock's recent 1.69% decline in regular trading, despite a strong earnings report, may reflect broader market volatility rather than company-specific issues, presenting a potential entry point for investors aligned with its electrification vision.

However, caution is warranted. Blue Bird's EV segment remains unprofitable at scale, and its reliance on government incentives introduces execution risk. Investors should monitor the company's ability to reduce EV production costs and secure funding for school districts. For those with a 5–10 year horizon, Blue Bird's dual-track strategy and leadership in a high-growth sector make it a strategic buy, particularly as the transition to electric transportation accelerates.

In conclusion, Blue Bird's Q2 results and EV momentum validate its position as a leader in the school bus industry's transformation. By balancing near-term profitability with long-term innovation, the company is well-positioned to deliver sustained shareholder value in a market poised for exponential growth.