Specialty Vehicles Manufacturer REV Group Shares Are Surging Today: What's Going On?

REV Group Inc REVG shares are trading higher after the company announced a special dividend and strategic actions.

Effective January 26, 2024, the company closed the sale of its school bus business, Collins Bus Corporation, to Forest River Bus, LLC for $303.0 million in cash.

Also, REV Group stated that it will exit the transit bus manufacturing by shutting down operations at its ElDorado National-California (ENC) business.

The ENC operation winding down is projected to be significantly completed by the end of the fiscal year 2024 once the completion of existing customer orders are completed.

Mark Skonieczny, President and CEO, said, “Delays in the supply of critical components and the build out of infrastructure to support EV adoption, as well as the financial health of key suppliers, has created a competitive bidding environment for diesel and CNG buses that has made it difficult for ENC to compete profitably versus peers of greater scale.” 

Starting the first quarter fiscal 2024, the company will have two reporting segments, with the remaining Commercial segment business will be combined with the Fire & Emergency businesses to form a new segment called Specialty Vehicles, and the Recreation segment will be renamed as Recreational Vehicles. 

The company anticipates generating at least $250 million in net cash proceeds from these strategic actions, which will be used to return around $180 million to shareholders in the form of a special cash dividend of $3.00 per share.

The special dividend is payable on February 16, 2024, to shareholders of record as of February 9, 2024.

The company plans to use the rest of the proceeds to pay down debt under its ABL credit facility.

As of October 31, 2023, the company had a net debt of $128.7 million and $384.1 million available under its ABL revolving credit facility. 

REV Group plans to provide updated fiscal 2024 guidance, including the impacts of these strategic actions, with its first quarter fiscal 2024 earnings release.

Price Action: REVG shares are up 7.76% at $19.43 on the last check Monday.