REV Group (NYSE: REVG) is a niche EV play without the flash of Lucid Motors (NASDAQ: LCID), Workhorse Group (NASDAQ: WKHS), or Nikola (NASDAQ: NKLA) but it has something they don’t. A deep moat. While there are other manufacturers making EV ambulances, fire trucks, busses, and RVs they are few and far between and, better, they aren’t in production yet and may not ever make it. When it comes to luxury, final mile, and long-haul delivery all you have to do is look at the top-tier names like Tesla (NASDAQ: TSLA), Ford (NYSE: F), and GM (NYSE: GM) to find the toughest competition on the planet. The takeaway is that REV Group has a deep moat and more. The company is not a pure play on EVs but a manufacturer of ICE, BEV, hybrid, and hydrogen fuel-celled powered vehicles as well. This gives it a deep moat as well as deep diversification.
REV Group Constrained By Supply Chain
REV Group had a good quarter and one that could have been better if not for supply chain constraints that limited production and deliveries. The company reported $594.8 million for a gain of 0.3% over last year as it is and beat the consensus by a slim margin as well. The gains were driven primarily by strength in the RV segment aided by pricing actions across the portfolio. The Fire & Emergency segment posted a YOY decline but this is due to parts supply and labor availability and not the underlying business. The Commercial segment posted a small 0.3% decline as well which was offset by a 19.6% increase in the RV segment.
Moving down to the margin, the company posted a decline in margin versus last year but in line with the Marketbeat.com consensus figure and there was a sequential improvement as well. This left the adjusted EPS at $0.24 and $0.02 better than expected and margin recovery is expected to continue into the end of the year. The only bad news is the guidance and even that is tempered by the details. The company lowered its revenue outlook for the year but only at the top and the new range still brackets the consensus. The guidance was held firm at the low end because of the record backlogs and supply visibility so there is a chance for outperformance should supply chain issues ease over the next couple of months.
“We delivered sequential margin improvement in the third quarter with demand for our vehicles remaining strong. We continue to take actions to offset inflationary pressures and remain focused on operational disciplines to drive margin expansion across our businesses,” said REV Group Inc. President and CEO Rod Rushing. “The mid-point of updated guidance anticipates continued margin momentum on revenue that remains constrained by the supply chain.”
REV Group Returns Capital To Shareholders
Another of REV Group’s many attractive qualities is its established nature and, more to the point, profitability. The company turns a profit and has a healthy balance sheet that supports not only a dividend but share repurchases as well. The stock yields about 1.80% with shares trading near $11.30 and it is a safe payout. The company suspended payment during the pandemic like so many others but brought it back quickly and at the pre-pandemic level which is about 21% of the earnings. The company has no history of dividend increases but it looks like it would be possible given the metrics.
The Technical Outlook: REV Group Bounces From Institutional Support
REV Group hit a bottom with the Q1 results and the Q2 results have the stock in reversal. The price action popped more than 5% and is showing some signs of near-term resistance but the weekly charts are very bullish. The stock is not only showing a new, higher level of support than where it first bounced but the bounce is supported by the indicators and the results as well. Assuming the market follows through on this move, 98% institutional ownership and 6% short interest should help drive the price up to the $14 level before the end of the year. 
