2024-03-11 16:21:21 ET
Summary
- My previously bullish views on CVG were supported by my expectations for better than expected class 8 truck production and management's long-term guidance.
- Truck production turned out to be better than expected but CVG was unable to benefit from that improvement.
- The market seems to be forecasting a competitive advantage period of 2 years for CVG. I don't have the confidence to bet against that.
- I am reducing my price target to $7.33 which is 9x my FY2024 FCF/share estimate of $0.81.
- I would be more optimistic for the business if some segments were spun off or divested. The many unrelated segments may be leading to a lack of focus in any one segment.
I was previously bullish on Commercial Vehicle Group, Inc. ( CVGI ) due to my belief that the market was too bearish on heavy duty and medium duty truck production, and due to management’s longer-term guidance on the growth of the electrical systems segment. My thoughts on truck production have turned out to be correct so far as economic strength and pull forward of orders due to environmental regulation led to higher than expected North American class 8 truck production in 2023 (337,000 vs. an initial prediction of 305,000). Additionally, ACT’s 2024 class 8 truck sales and production forecasts were recently bumped up. Despite continued weakness in the freight market, truck production has remained relatively strong....
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Commercial Vehicle Group: Disappointing FY2023 Results And Outlook