REV Group: Navigating Challenges with Resilient Specialty Vehicles

The stock of REV Group (NYSE: REVG) has faced headwinds in recent quarters, but beneath the surface lies a company demonstrating resilience in its core operations. While macroeconomic uncertainties and sector-specific pressures have weighed on investor sentiment, the Specialty Vehicles segment—its largest and most profitable division—has emerged as a bright spot. For investors willing to look past short-term volatility, the company’s fundamentals suggest a compelling risk-reward profile.

The Numbers Tell a Mixed, but Improving Story

REV’s Q1 2025 results underscore the importance of adjusting for the divestiture of its bus manufacturing businesses (Collins Bus and El Dorado National). Total net sales fell 10.4% to $525.1 million, but excluding the $76.6 million contribution from those now-sold divisions, sales rose 3.1% year-over-year. This growth was driven by the Specialty Vehicles segment, which saw sales increase 8.7% (excluding the bus businesses) to $370.2 million. Fire apparatus and ambulance units, in particular, benefited from strong demand and improved pricing.

Meanwhile, the Recreational Vehicles (RV) segment struggled, with sales down 8.5% to $155.0 million, reflecting lower unit shipments and dealer incentives. The segment’s backlog also dropped 29.6% to $264.5 million, suggesting lingering demand concerns.

Adjusted EBITDA: A Key Bright Spot

Despite the top-line challenges, adjusted EBITDA hit a record $36.8 million in Q1 2025, up 20.7% year-over-year. Excluding the now-divested bus businesses, EBITDA surged 78.6% to $26.9 million. The Specialty Vehicles segment alone saw a 34.4% EBITDA increase, fueled by operational efficiencies and pricing power. This margin expansion is critical, as it suggests the company is executing on cost controls and capitalizing on its niche markets.

The Backlog Advantage

The Specialty Vehicles backlog grew to $4.226 billion (excluding buses), up $446.2 million from the prior year. This is a significant tailwind for future revenue, as backlogs in emergency vehicle markets typically convert into sales over 12–18 months. Fire departments and healthcare providers, which rely on these vehicles, tend to prioritize budgets for critical equipment even during economic downturns.

In contrast, the RV backlog remains a concern. However, this segment’s cyclicality—sensitive to interest rates and consumer confidence—means it could stabilize if housing markets recover or inflation moderates.

Balance Sheet Strength and Shareholder Returns

REV’s financial flexibility is a key advantage. Net debt stood at $108.4 million as of January 2025, with $31.6 million in cash and $262.9 million available under its credit facility. The company repurchased $19.2 million of its stock in Q1, signaling confidence in its valuation. At a P/E ratio of 5.65x, shares appear undervalued relative to peers. For context, .

Risks and Near-Term Challenges

The Transportation – Services sector, where REV operates, ranks in the bottom 22% of industries, per Zacks, reflecting broader sector-specific risks. The RV segment’s reliance on discretionary spending and its exposure to inflation-driven cost pressures remain vulnerabilities. Additionally, the company’s stock has underperformed the S&P 500 this year, down 14.3% versus the index’s -1.8% decline.

Conclusion: A Stock for the Long Run?

REV Group’s stock presents an intriguing opportunity for investors with a 12–18-month horizon. The Specialty Vehicles segment’s robust backlog and margin expansion suggest sustainable growth, even as the RV division faces cyclical headwinds. With a low P/E, strong balance sheet, and share repurchases signaling confidence, the stock may be undervalued.

However, near-term risks—including lingering inflation, interest rate sensitivity in the RV market, and broader economic uncertainty—demand caution. The company’s Q1 results, while mixed, highlight its ability to navigate sector-specific challenges. Should the economy stabilize, REV’s Specialty Vehicles backlog could drive earnings growth, justifying a rebound in its stock price. For now, this is a name to watch, not necessarily to rush into—but one that merits a closer look as macroeconomic clouds begin to clear.

In the end, REV Group’s story is less about short-term volatility and more about its long-term positioning in mission-critical markets. For investors willing to look beyond the noise, the data suggests this could be a value play with asymmetric upside potential.