Heavy Transportation Equipment

Heavy transportation equipment companies are investing in automated vehicles that increase efficiencies and connected machinery that collects actionable data. Some are also developing electric vehicles and mobility solutions to address customers’ concerns about carbon emissions, creating new sales opportunities. Additionally, they are increasingly offering automated equipment that increases efficiencies and connected machinery that collects actionable data. On the other hand, heavy transportation equipment companies are at the whim of economic cycles. Interest rates, for example, can greatly impact the construction and transport volumes that drive demand for these companies’ offerings.

Sales Growth

A company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Commercial Vehicle Group struggled to generate demand over the last five years as its sales dropped by 1.7% annually, a rough starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Commercial Vehicle Group’s recent history shows its demand has stayed suppressed as its revenue has declined by 6.3% annually over the last two years.

This quarter, Commercial Vehicle Group missed Wall Street’s estimates and reported a rather uninspiring 30.4% year-on-year revenue decline, generating $171.8 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 8.5% over the next 12 months, an improvement versus the last two years. This projection is above average for the sector and indicates the market thinks its newer products and services will catalyze higher growth rates.

Here at StockStory, we certainly understand the potential of thematic investing. Diverse winners from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST) could all have been identified as promising growth stories with a megatrend driving the growth. So, in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefitting from the rise of AI, available to you FREE via this link.

Operating Margin

Commercial Vehicle Group was profitable over the last five years but held back by its large cost base. Its average operating margin of 3% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

On the plus side, Commercial Vehicle Group’s annual operating margin rose by 1.3 percentage points over the last five years.

This quarter, Commercial Vehicle Group’s breakeven margin was down 5.6 percentage points year on year. Since Commercial Vehicle Group’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.

 

Earnings Per Share

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth was profitable.

Sadly for Commercial Vehicle Group, its EPS declined by more than its revenue over the last five years, dropping 5.7% annually. However, its operating margin actually expanded during this timeframe, telling us that non-fundamental factors affected its ultimate earnings.

Diving into the nuances of Commercial Vehicle Group’s earnings can give us a better understanding of its performance. A five-year view shows Commercial Vehicle Group has diluted its shareholders, growing its share count by 8.4%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Commercial Vehicle Group, its two-year annual EPS growth of 34.9% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.

In Q3, Commercial Vehicle Group reported EPS at negative $0.03, down from $0.22 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Commercial Vehicle Group’s full-year EPS of $0.71 to shrink by 7.1%.

Key Takeaways from Commercial Vehicle Group’s Q3 Results

We struggled to find many strong positives in these results. Its full-year revenue guidance missed and its EBITDA guidance for the full year fell short of Wall Street’s estimates. Overall, this was a weaker quarter. The stock traded down 10.7% to $2.75 immediately after reporting.

The latest quarter from Commercial Vehicle Group’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.