(Adds details on lawsuits, updates shares)
By James B. Kelleher
Sept 3 (Reuters) - Navistar International Corp on Wednesday reported a smaller-than-expected quarterly loss as commercial vehicle demand rebounded in North America and warranty costs related to its roll-out of a failed emissions-reduction system continued to fall.
The suburban Chicago-based maker of trucks, buses and military vehicles also reported its first pretax quarterly profit from continuing operations since 2011 and raised its forecast for industry sales of the biggest commercial trucks in the United States and Canada for fiscal 2014.
The company believes customers in those two countries, critical for Navistar, will buy between 235,000 to 240,000 of the big rigs, up from a previous forecast of 225,000 to 235,000 trucks.
Navistar shares, up nearly 15 percent over the past year, rose another 1.5 percent to $39.00 in early trading on the New York Stock Exchange.
The company said its loss narrowed to $2 million, or 2 cents a share, in the third quarter ended July 31, from $247 million, or $3.06 a share, during the comparable quarter last year.
Sales were flat at $2.8 billion.
Analysts, on average, expected Navistar to post a loss of 66 cents a share, according to Reuters estimates.
The company said ongoing efforts to pare overhead costs and to restructure operations paid off during the quarter, in the wake of a costly and unsuccessful bid to develop and market a novel emission-reduction system known as "EGR." Structural costs fell $86 million, or 21 percent.
Navistar said outlays on warranty-related repairs fell 22 percent in the third quarter. So far this year, the company has spent $65 million on the claims, down from $252 million during the comparable period in 2013.
Even so, the EGR issue is not entirely behind the company. During the quarter, a flurry of lawsuits seeking class-action status were filed against it in the United States and Canada. The four suits allege that Navistar's EGR-equipped engines had pervasive quality issues and defects that the company knew about but failed to disclose to buyers.
Navistar says it has not been served with the Canadian lawsuit. Its deadline to respond to the three U.S. lawsuits is September 10 but Navistar has warned investors it is "unable to provide meaningful quantification of how the final resolution of these claims may impact our future consolidated financial condition."
Stephen Volkmann, an analyst at Jefferies Equity Research, said that while Navistar's results were encouraging, its market share continued to lag management's targets.
"Retail sales share, which trails orders by several months, was 14 percent" through the end of July, Volkmann said, well below the 21 percent goal the company had set for itself and down from 15 percent at the end of the last quarter.
Navistar CEO and President Troy Clarke acknowledged the continuing challenge in a statement.
"While we have work ahead of us to grow the business, improve our market share and further reduce our cost of doing business," Clarke said. (Additional reporting by Sagarika Jaisinghani in Bangalore; Editing by Jeffrey Benkoe, Bernadette Baum and Nick Zieminski)