The REV Group has a deep gap in the world of electric vehicles

REV Group (NYSE:) is a niche EV game without the flash of Lucid (NASDAQ:), Workhorse Group Inc (NASDAQ:) or Nikola Corp (NASDAQ:) but it has something they don’t.

Most other manufacturers make electric ambulances, fire trucks, buses, and campers are rare, and best of all, they’re not in production yet, ever, ever. When it comes to luxury, last mile and long distance delivery, all you have to do is look at top names like Tesla (NASDAQ:), Ford Motor Company (NYSE:) and General Motors Company ( NYSE 🙂 to find the toughest competition on the planet.

The takeaway is that the REV group has a deep moat and more. The company isn’t a pure play on electric vehicles, but a maker of ICE (NYSE:), BEV, hybrid and hydrogen fuel cell vehicles. This gives it a deep ditch as well as deep diversification.

REV Group constrained by the supply chain

had a good quarter, which could have been better if not for supply chain constraints limiting production and deliveries. The company reported $594.8 million for a 0.3% gain over last year and also beat consensus by a slim margin. Gains were driven primarily by strength in the RV segment, aided by pricing actions across the portfolio.

The Fire & Emergency segment saw a year-over-year decline, but this was due to parts supply and labor availability and not the underlying business. The commercial segment also showed a slight decrease of 0.3%, offset by a 19.6% increase in the RV segment.

Moving down to margin, the company posted a decline in margin from a year ago, but in line with the Marketbeat.com consensus figure, and there was also a sequential improvement. This left Adjusted EPS at $0.24 and $0.02 better than expected, and the recovery in margins is expected to continue through the end of the year.

The only bad news is the tips. The company lowered its revenue outlook for the year, but only to the top, and the new lineup still falls within the consensus. Guidance has been kept at the bottom of the scale due to record backlogs and supply visibility, so there is a chance of outperformance should supply chain issues ease over the next two months. . REV Group President and CEO Rod Rushing is sad,

“We achieved sequential margin improvement in the third quarter with strong demand for our vehicles. We continue to take action to offset inflationary pressures and remain focused on operational disciplines to drive margin expansion across all of our businesses. The midpoint of the updated guidance calls for continued momentum in revenue margins that remain constrained by the supply chain.

REV Group returns capital to shareholders

Another of the many attractive qualities of the REV Group is its established nature and, more specifically, its profitability. The company is making profits and has a healthy balance sheet that dividends have added but share buybacks.

The stock is yielding around 1.80%, with the shares trading near $11.30, which is a safe payout. Like so many others, the company suspended payment during the pandemic but brought it back quickly and to pre-pandemic levels, around 21% of profits. The company has no history of increasing dividends, but it would be possible, given the parameters.

The technical outlook: REV Group bounces back on institutional support

REV Group hit bottom with first quarter results, and second quarter results caused a reversal. The price action has jumped over 5% and is showing signs of near-term resistance, but the weekly charts are very bullish. The stock is not only showing a new level of support higher than where it first bounced, but the rebound is also supported by indicators and earnings.

Assuming the market follows through, 98% institutional ownership and 6% short interest should help push the price up to the $14 level before the end of the year.

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