REV Group (REVG)

Speciality vehicle provider REV (NYSE:REVG) reported Q2 CY2025 results exceeding the market’s revenue expectations, with sales up 11.3% year on year to $644.9 million. The company’s full-year revenue guidance of $2.43 billion at the midpoint came in 0.8% above analysts’ estimates. Its non-GAAP profit of $0.79 per share was 24.7% above analysts’ consensus estimates.

Company Overview

Offering the first full-electric North American fire truck, REV (NYSE:REVG) manufactures and sells specialty vehicles.

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Competitors offering similar products include Oshkosh (NYSE:OSK), Thor (NYSE:THO), Winnebago (NYSE:WGO), and Spartan Motors (NASDAQ:SPAR)

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, REV Group struggled to consistently increase demand as its $2.40 billion of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and is a tough starting point for our analysis.

Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. REV Group’s recent performance shows its demand remained suppressed as its revenue has declined by 3.4% annually over the last two years. REV Group isn’t alone in its struggles as the Heavy Transportation Equipment industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

This quarter, REV Group reported year-on-year revenue growth of 11.3%, and its $644.9 million of revenue exceeded Wall Street’s estimates by 5%.

Looking ahead, sell-side analysts expect revenue to grow 6.3% over the next 12 months. While this projection indicates its newer products and services will catalyze better top-line performance, it is still below the sector average.

Cost of sales for an industrials business is usually comprised of the direct labor, raw materials, and supplies needed to offer a product or service. These costs can be impacted by inflation and supply chain dynamics.

REV Group has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 12.2% gross margin over the last five years. Said differently, REV Group had to pay a chunky $87.81 to its suppliers for every $100 in revenue.

REV Group produced a 15.8% gross profit margin in Q2, up 2.3 percentage points year on year. REV Group’s full-year margin has also been trending up over the past 12 months, increasing by 1.8 percentage points. If this move continues, it could suggest better unit economics due to more leverage from its growing sales on the fixed portion of its cost of goods sold (such as manufacturing expenses).

REV Group was profitable over the last five years but held back by its large cost base. Its average operating margin of 3.5% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, REV Group’s operating margin rose by 4.1 percentage points over the last five years.

In Q2, REV Group generated an operating margin profit margin of 8.8%, up 3.9 percentage points year on year. The increase was encouraging, and because its operating margin rose more than its gross margin, we can infer it was more efficient with expenses such as marketing, R&D, and administrative overhead.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

REV Group’s EPS grew at an astounding 161% compounded annual growth rate over the last five years, higher than its flat revenue. This tells us management responded to softer demand by adapting its cost structure.

Diving into REV Group’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, REV Group’s operating margin expanded by 4.1 percentage points over the last five years. On top of that, its share count shrank by 22.1%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For REV Group, its two-year annual EPS growth of 47.7% was lower than its five-year trend. We still think its growth was good and hope it can accelerate in the future.

In Q2, REV Group reported adjusted EPS of $0.79, up from $0.48 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects REV Group’s full-year EPS of $2.40 to grow 31.1%.

Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.

REV Group has shown weak cash profitability over the last five years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 3.8%, subpar for an industrials business.

Taking a step back, an encouraging sign is that REV Group’s margin expanded by 5.4 percentage points during that time. The company’s improvement shows it’s heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).

REV Group’s management team makes decent investment decisions and generates value for shareholders. Its five-year average ROIC was 11.1%, slightly better than typical industrials business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. REV Group’s ROIC has increased significantly over the last few years. This is a good sign, and if its returns keep rising, there’s a chance it could evolve into an investable business.

REV Group reported $36 million of cash and $113.4 million of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $209.4 million of EBITDA over the last 12 months, we view REV Group’s 0.4× net-debt-to-EBITDA ratio as safe. We also see its $13.5 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

We were impressed by how significantly REV Group blew past analysts’ EBITDA expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Looking ahead, EBITDA guidance exceeded expectations. Zooming out, we think this was a very good print with some key areas of upside. The stock traded up 12.8% to $58.42 immediately following the results.

Updated: December 4, 2025 at 10:28 PM EST

When considering an investment in REV Group, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

REV Group has some positive attributes, but it isn’t one of our picks. Although its revenue growth was weak over the last five years, its growth over the next 12 months is expected to be higher. And while REV Group’s low gross margins indicate some combination of competitive pressures and high production costs, its astounding EPS growth over the last five years shows its profits are trickling down to shareholders.

REV Group’s P/E ratio based on the next 12 months is 17.4x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $60.20 on the company (compared to the current share price of $56.83).