BROOKFIELD, Wis. - REV Group, Inc. (NYSE: NYSE:REVG), a key player in the production of specialty vehicle brands, has completed the sale of its subsidiary ElDorado National (California), Inc. (ENC) to Rivaz, Inc. The transaction, which involved a purchase price of approximately $52 million, marks REV Group's exit from the bus manufacturing sector.
The sale of ENC, a company with a longstanding presence in the mass transit industry spanning five decades, was part of REV Group's strategic shift announced earlier this year. Mark Skonieczny, President and CEO of REV Group, expressed his gratitude to customers, employees, and dealers for their support during the transition period. He also noted the company's enthusiasm for ENC's future under the new ownership of Rivaz.
REV Group has stated that the net proceeds from this divestiture will be directed towards reducing the outstanding borrowings under its Asset-Based Lending (ABL) credit facility. This move is indicative of the company's efforts to streamline its operations and focus on its core segments.
The company, which serves a diverse customer base primarily in the United States, operates through two segments: Specialty Vehicles and Recreational Vehicles. The Specialty Vehicles Segment offers custom vehicle solutions for public services and commercial infrastructure, such as ambulances, fire apparatus, terminal trucks, and industrial sweepers. The Recreational Vehicles Segment produces a range of RVs, from Class B vans to Class A motorhomes.
REV Group's portfolio consists of established vehicle brands, some of which have pioneered their respective categories and have histories dating back over 50 years. The company's decision to sell ENC is a significant step in its ongoing business strategy to optimize its product offering and financial health.
The information in this article is based on a press release statement from REV Group, Inc.
In other recent news, REV Group announced mixed financial results for the third quarter of fiscal year 2024. The company's Specialty Vehicles segment, particularly its ambulance and fire group businesses, showed improved performance despite a significant sales decline in the recreational vehicle market. The consolidated backlog of orders remained robust at $4.4 billion, primarily driven by orders for fire and emergency vehicles. REV Group's net debt stood at $165 million, with an expectation to maintain leverage below 1x. The company anticipates modest sequential revenue growth and a slightly higher specialty vehicles margin as the fiscal year closes, forecasting full-year revenue between $2.35 billion and $2.45 billion, with adjusted EBITDA guidance of $155 million to $165 million.
Baird maintained its Outperform rating on REV Group, citing operational performance and slight EBITDA guidance increase as positive factors. The firm noted the strength in the Fire & Emergency segment while acknowledging the decline in the Recreation segment. Baird's analysis suggests that the stock should trade closer to the mid-$30s, not accounting for potential asset sales or future mergers and acquisitions.
In a significant development, REV Group announced the election of David C. Dauch as an independent member of its Board of Directors. Dauch, Chairman of the Board & Chief Executive Officer of American Axle (NYSE:AXL) & Manufacturing Holdings, brings nearly 30 years of experience from AAM, which is expected to contribute significantly to the strategic and operational goals of REV Group. These are the recent developments shaping REV Group's current financial landscape.
InvestingPro Insights
REV Group's strategic decision to sell ElDorado National (California), Inc. aligns with its focus on core segments and financial optimization. This move is reflected in several key metrics and insights from InvestingPro.
According to InvestingPro data, REV Group's market capitalization stands at $1.55 billion, with a price-to-earnings ratio of 6.78, indicating a potentially undervalued stock. This valuation metric is particularly interesting in light of the company's recent divestiture and its plan to use the proceeds to reduce debt.
An InvestingPro Tip highlights that management has been aggressively buying back shares, which could signal confidence in the company's future prospects following this strategic sale. Additionally, the company boasts a high shareholder yield, potentially making it an attractive option for value-oriented investors.
Despite the sale of its bus manufacturing division, REV Group maintains a strong financial position. The company's revenue for the last twelve months as of Q3 2024 was $2.48 billion, with a gross profit of $314 million. Notably, REV Group's EBITDA growth stands at an impressive 56.46% for the same period, suggesting improved operational efficiency.
It's worth noting that REV Group's stock has shown remarkable performance, with a one-year price total return of 128.76% as of the latest data. This substantial increase may reflect investor optimism about the company's strategic direction and focus on core competencies.
For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for REV Group, providing a deeper understanding of the company's financial health and market position.
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