On Thursday, Baird maintained an Outperform rating on REV Group (NYSE:REVG), increasing the price target to $38 from $32.
"The main catalyst for the stock has been a large Specialty backlog with sizable price/cost tailwind driving margin and EPS expansion through 2027," the firm said.
The analyst noted that the investor call and the fiscal year 2027 targets have confirmed both the pace and magnitude of the expected growth. The positive outlook is further bolstered by the potential for future portfolio adjustments, which could lead to a structural re-rating of the company's stock value, similar to what has been observed with peers such as FSS or ALG.
In addition to the robust Specialty backlog, the analyst pointed out that a favorable price/cost tailwind is expected to drive the company's margin and EPS growth over the next few years.
The firm also cited the company's ability to generate meaningful free cash flow (FCF) as a contributing factor to the positive outlook.
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