Why Rev Group stock is down today

Rev Group (REV -10.72%) beat Wall Street earnings expectations for the most recent quarter but cut its full-year outlook. Investors are focused on the bad news to come, sending Rev shares down 14% as of 10 a.m. ET.

A leisurely slow down

Rev is a manufacturer of recreational vehicles (RVs) and specialty trucks, including ambulances and other public service vehicles. The company earned $0.48 per share in the fiscal third quarter ended July 31, beating Wall Street’s estimate of $0.42 per share. However, revenue of $579.4 million was about $40 million outside of consensus.

The specialty vehicle segment posted a double-digit earnings margin before interest, taxes, depreciation and amortization (EBITDA) thanks to strong demand for firefighting and ambulance equipment. CEO Mark Skonieczny said “(RV) market conditions remain challenging, however, we continue to be proactive in managing our cost structure to align with end market demand and deliver operating margins in line with our expectations”.

The company does not expect conditions to improve overnight. Rev cut its full-year 2024 revenue guidance by $50 million to $2.35 billion to $2.45 billion, suggesting a downside to the consensus estimate of $2.44 billion.

Is Rev Group stock a buy?

In theory, Rev offers a nice balance between the highly cyclical RV business and the more stable utility vehicle business. When times are tough, consumers tend to buy fewer high-priced items like RVs, but demand for fire trucks and ambulances is steady throughout the business cycle.

Rev’s model works and the company is stable, but without the RV side, it’s hard for Rev Group to outperform. If the US economy avoids a recession, there is reason to believe that RV sales will rebound as rates fall. Until more is known about consumer health, it could be difficult for Rev Group stock to outperform.