Commercial Vehicle Enjoying A Profitable Peak, But Needs To Plan For The Future

This is harvest time for Commercial Vehicle (CVGI), as this supplier of seats, wiring harnesses, and other components to the global truck, construction, ag, and mining equipment market is seeing robust demand as companies like Daimler (OTCPK:DMLRY), Volvo (OTCPK:VOLVY), and PACCAR (PCAR) deliver on record Class 8 truck backlogs and healthy medium-duty truck backlogs as well. While Commercial Vehicle is weathering some higher manufacturing costs (wage-driven, primarily), the company is doing a good job of managing costs and maximizing margins.

The “what next” question is very relevant to this stock. I expect a double-digit decrease in sales next year, as plunging Class 8 orders will quickly deplete that backlog, and recent wins outside of trucking and in geographies like China won’t offset it. I’d love to see CVGI put some of its liquidity to work – while management has long talked of wanting to acquire complementary assets, they haven’t done much, and I think acquiring some electrification assets could be money well spent. I do still believe these shares are undervalued, but they’re unfollowed and the shares could languish on a steeper/longer trough in the core truck market.

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Commercial Vehicle Enjoying A Profitable Peak, But Needs To Plan For The Future