REV Group (REVG) Earnings Forecasts: Buying Opportunity?

On December 13, REV Group, Inc. (REVG) is expected to release its financial results for the fourth quarter of its fiscal year. Wall Street expects the company to post earnings per share of $0.34, indicating a 21.4% increase over last year. Revenue is projected to reach $666.13 million, representing a 6.8% increase year-over-year.

In the fiscal third quarter, the company achieved robust operational and financial gains, generating $56 million in free cash flow and fortifying its balance sheet. Emphasizing execution and the progression of REV Drive lean initiatives, the company aims to diminish manufacturing complexity, enhance efficiency, and boost throughput.

Confident in the sustained momentum, REVG has updated its fiscal guidance for 2023, anticipating net sales between $2.55 billion and $2.60 billion, surpassing the previous projection of $2.45 billion to $2.55 billion. The progress in operating programs underscores the company's positive outlook for the fiscal year.

Moreover, the company projects an elevated financial performance, with adjusted net income anticipated to fall between $63 million and $73 million, surpassing the earlier estimate of $48 million to $62 million. 

Similarly, adjusted EBITDA is expected to range between $135 million and $145 million, up from the previous guidance of $120 million to $135 million. Additionally, the company forecasts an increased free cash flow in the range of $70 million to $75 million, compared to the prior estimate of $43 million to $56 million.

Furthermore, on August 31, REVG announced the availability of the Model year 2024 American Coach®, Fleetwood RV®, and Holiday Rambler® coaches. These offerings uphold the Fleetwood Family of Brands' tradition, featuring expert design, engineered quality, and innovative new features emphasizing luxury, family, and adventure.

The introduction would enhance REVG's market position by meeting customer expectations and catering to diverse preferences, thereby fostering brand loyalty and attracting a broader customer base. Also, incorporating innovative features reinforces REVG's commitment to staying at the forefront of the recreational vehicle industry.

Shares of REVG have gained 12.2% over the past month and 33.3% year-to-date to close the last trading session at $16.96.

Here are the financial aspects of REVG that could influence its performance in the near term:

Solid Last Reported Financials

During the fiscal third quarter that ended July 31, 2023, REVG’s net sales increased 14.3% year-over-year to $680 million. Its adjusted EBITDA rose 33.6% from the year-ago value to $39.40 million. Also, the company’s adjusted net income and adjusted net income per share grew 46.2% and 45.8% from the prior year’s period to $20.90 million and $0.35, respectively.

Robust Growth Record

Over the past three years, REVG’s revenue increased at a CAGR of 3.5%. Its operation income (EBIT) grew at a 463.3% CAGR. In addition, the company’s tangible book value rose at a 2.3% CAGR over the same time frame.

Positive Analyst Estimates

The consensus revenue estimate of $2.61 billion for the fiscal year ended October 2023 reflects a 12% year-over-year improvement. Moreover, the company’s EPS for the same year is estimated to come in at $1.17, up 46.7% from the prior year. Furthermore, REVG topped the consensus revenue estimates in all four trailing quarters.

Discounted Valuation

In terms of forward non-GAAP P/E, REVG is trading at 13.93x, 22.9% lower than the industry average of 18.07x. Its forward EV/Sales of 0.45x is 74.5% lower than the 1.76x industry average. REVG’s forward EV/EBITDA of 8.50x is also 24.3% lower than the 11.22x industry average.

POWR Ratings Exhibit Strong Prospects

REVG’s strong outlook is apparent in its POWR Ratings. The stock has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. REVG has a B grade for Growth, which is justified by its historical growth record. In addition, the stock has a B grade for Value, in sync with its lower-than-industry valuation.

REVG has topped the 51-stock Auto & Vehicle Manufacturers industry. Click here to access REVG’s Momentum, Stability, Sentiment, and Quality ratings.

Bottom Line

With a solid third-quarter performance and a commitment to operational excellence, REVG is well-positioned for significant future development. Moreover, creative 2024 models demonstrate the company's dedication to client happiness, brand fidelity, and market expansion. On top of it, the company made positive adjustments to its financial guidance.

With solid financials and a discounted valuation, it would appear wise to invest in REVG in order to reap long-term benefits.

How Does REV Group, Inc. (REVG) Stack Up Against Its Peers?

While REVG has an overall grade of A, equating to a Strong Buy rating, you may also check out these other A (Strong Buy) stocks within the Auto & Vehicle Manufacturers industry: Mercedes-Benz Group AG (MBGAF), Honda Motor Co., Ltd. (HMC), and Mazda Motor Corporation (MZDAY). To explore more Auto & Vehicle Manufacturers stocks, click here.

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REVG shares were trading at $16.74 per share on Tuesday morning, down $0.22 (-1.30%). Year-to-date, REVG has gained 34.15%, versus a 22.26% rise in the benchmark S&P 500 index during the same period.

Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.

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