Investing.com -- REV Group Inc. was upgraded to equal weight from underweight by Morgan Stanley (NYSE:MS) driven by better operational execution, easing cost pressures, and strong demand in its fire and emergency vehicles segment.
The brokerage raised its price target on the maker of specialty and recreational vehicles to $46 from $33 on improved earnings forecasts and continued margin strength despite earlier concerns over inflation and tariffs.
The upgrade follows several quarters of stronger-than-anticipated performance, particularly in Specialty Vehicles, where margins have exceeded expectations.
Initial fears that rising input costs would erode profitability have not materialized, the broker said, with pricing gains and efficiency improvements helping to preserve earnings.
REV’s fire apparatus business has shown notable improvement in manufacturing throughput.
Efficiency upgrades across facilities, including equipment modernization and workforce training, have led to increased shipments at a time when demand for fire trucks remains elevated.
Despite a backlog extending into 2027, orders continue to outpace deliveries.
The broker said it still sees longer-term risks beyond 2028, when industry replacement cycles could slow. But near-term, as margins remain robust, investors are likely to maintain a positive view on the stock.
In the company’s recreational vehicle segment, market conditions remain mixed. REV reported the first monthly sequential rise in retail shipments in more than two years, and inventory levels for Class A and C vehicles appear stable.
However, Class B inventories remain elevated, and this segment is viewed as more vulnerable to any macroeconomic downturn.
The brokerage adjusted its 2025 earnings estimate upward, citing higher revenue and margin forecasts in Specialty Vehicles, partially offset by expected tariff-related costs.
Shares of REV Group (NYSE:REVG) are up around 35% year-to-date.
