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Morgan Stanley (NYSE:MS) upgraded REV Group (NYSE:REVG) from Underweight to Equalweight on Wednesday, raising its price target to $46.00 from $33.00 previously. The stock has shown remarkable strength, delivering a 59.75% return over the past year and currently trading near its 52-week high of $46.10. According to InvestingPro analysis, REV Group appears fairly valued at current levels.
The upgrade reflects REV Group’s better-than-expected price/cost dynamic, stronger company throughput via operational efficiency, and robust product demand, according to the research firm. InvestingPro data supports this view, showing a "GREAT" overall financial health score, with particularly strong marks in profit and price momentum metrics.
Morgan Stanley acknowledged it had underestimated the company’s strong execution amid macro risks and the healthy underlying demand for fire and emergency vehicles, which comprise a significant portion of REV Group’s business.
The research firm’s updated price target stems from higher estimates following its post-second quarter 2025 model update, along with rolling forward its price-to-earnings valuation methodology to fiscal year 2026 from fiscal year 2025.
While Morgan Stanley remains cautious about the fire and emergency vehicle cycle beyond 2027, it doesn’t expect a normalization of the backlog to necessarily impact the stock negatively as long as margin expansion remains robust.
In other recent news, REV Group has reported stronger-than-expected earnings for the second quarter of fiscal year 2025. The company’s earnings per share reached $0.70, surpassing the forecast of $0.55, while revenue exceeded expectations at $629.1 million compared to the anticipated $603.5 million. DA Davidson analysts have responded by raising the price target for REV Group stock to $51 from $39, maintaining a Buy rating. The analysts cited the company’s increased EBITDA forecast for fiscal year 2025 and strong confidence in its fiscal year 2027 guidance as factors for the upgrade. Additionally, REV Group announced a strategic exit from its non-motorized travel trailer business, aligning with its focus on more scalable operations. In personnel news, Linas Polteraitis has been promoted to chief supply chain officer, continuing to report to CEO and President Mark Skonieczny. Polteraitis has been credited with strengthening the company’s procurement and supply chain operations since joining in September 2023. These developments reflect REV Group’s ongoing efforts to enhance operational efficiency and strategic focus.
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