REV Group Shifts Into High Gear: Double-Digit Upside Ahead REV Group's new CEO guided the company through supply chain challenges, helped produce a market-beating quarter, and improved guidance.

May 18th is important for REV Group (NYSE: REVG) shareholders. That is the day interim CEO and CFO Mark Skonieczny became the official CEO and president. It is also the day the rebound began, the day the market confirmed a bottom that was first reached in 2022. Mr. Skonieczny has been with the company since January 2023 and has a rich pedigree that includes 17 years with Johnson Controls and time with Adient PLC, a manufacturer of automobile components.

The news today is that REV Group's choice of CEO appears to have been good. The company overcame its supply chain issues and posted a game-changing report for FQ2 that sent shares up more than 15% in premarket trading. The guidance also increased this stock which is on track to rise another 20% to 25% this year.

REV Group Shows Strength In All Segments

REV Group had a truly surprising quarter, given the headwinds and challenges it had to overcome. The company produced $681.2 million in net revenue, up 18.2% compared to last year and 1700 basis points better than expected. The strength was driven by pricing actions and volume in all segments, with notable callouts for Fire & Emergency and Commercial, which had been experiencing the most significant issues. Fire & Emergency revenue grew by 15.6%, Commercial grew by 56.4%, and even the RV segment grew by 6.5%.

More importantly, efforts to improve operability, pricing increases, and the increase in production improved leverage. The company's GAAP net income came in at $14.2 million compared to last year's loss, and adjusted results are more than double the previous year. The adjusted EPS of $0.35 is up $0.18 compared to last year and beat by $0.17, a strength that increased the guidance.

The company expects momentum to continue in the 2nd half and raised it guidance for revenue and earnings. The company raised the top and bottom of the revenue range to above the analysts' consensus, and earnings are expected to be stronger too. One detail in the earnings guidance that is helping the market to move higher is that the low end was increased by 1500 basis points, 5 times the top end increase, which raises the midpoint by 8%.

REV Group Revs Up The Capital Return Program

REV Group is a solid dividend-paying micro-cap with a yield near 1.5% adjusted for the post-release pop in prices. The yield is safe at 25% of the earnings outlook, about 20% of the guidance, and a healthy balance sheet back it up. The company has net debt, but leverage is low, and debt is flat compared to last year. The company also repurchases shares and increased the capital return program when it released the Q2 results. The board replaced the existing repurchase authorization with a new 1 worth $175 million or about $100 million net of the previous. The new plan is worth about 26% of the pre-release market cap and has a 2-year window.

Shares prices surged after the news and increased as much as 24% before falling back to lower levels. Regardless, the market is up by double-digits following the release, confirming a bottom at the $10 level. If the market follows through on this move, it could rise to $14.20 before hitting significant resistance. If it can cross that line and move higher, this market could gain another 20% to 25% by the end of the year. The following earnings report or the analysts who have yet to speak out about the new guidance might be the catalyst.