So far, so good for Commercial Vehicle Group’s (NASDAQ:CVGI) (or “CVG”) attempt to significantly restructure the business away from its low-return, commoditized truck components legacy and toward new opportunities in higher-value electrification projects, including BEV trucks and warehouse automation. The third quarter saw 65% of the company’s revenue come from non-truck sources, and while that number will likely jump around on the cyclicality of the truck business, early execution on this new strategy has been good.
CVG shares have doubled since my last update, and they could still have plenty of room to run. Initial progress with electrical commercial vehicle projects has been positive, and warehouse automation remains a red-hot market. So much of the modeling here is speculative as the company targets fast-growing, relatively new markets where they don’t have much experience, but as an emerging “picks and shovels” supplier to both electrical commercial vehicles and warehouse automation, there’s definite appeal. Keep in mind, though, that this is a small fish swimming in murky, turbulent waters and these shares do carry well above-average risk.
Waiting For Fourth Quarter Results
CVG is a late reporter in the cycle, so we won’t see fourth quarter earnings until next week, but given the trends and themes in the commercial vehicle and warehouse automation spaces, there’s no reason not to expect a pretty good quarter relative to expectations.
Commercial vehicle suppliers like Cummins (CMI) and Dana (DAN) reported better than expected revenue in the fourth quarter, and while PACCAR (PCAR) had a noisy quarter, it did meaningfully raise its guidance for North American Class 8 truck deliveries in 2021 (up 15% at the midpoint, or up 22% year-over-year).
Suppliers of automation solutions to the warehouse end-market likewise reported strong results, with Honeywell (HON) reporting 37% year-over-year growth and a 70% year-over-year improvement
