Commercial Vehicle: Better-Placed For The Truck Downturn Than The Share Price Suggests

It has to be frustrating at times to be part of Commercial Vehicle’s (CVGI) management team. While this supplier of seating, wiring, trim, and other components to the global trucking and construction equipment market has actually undergone a pretty meaningful restructuring since the last peak in Class 8 truck builds, it doesn’t show up in the share price (which is basically flat since then). Of course, CVGI hasn’t executed flawlessly over that time either; many of the company’s growth plans have come up short, and I’ve taken issue with the approach to M&A over the years.

With the company on the edge of the cliff with respect to U.S. Class 8 truck builds, this is a tough stock to recommend. I do believe the shares are undervalued on a long-term basis assuming low single-digit revenue growth and mid-single-digit FCF growth, but cyclical stocks tend to trade more on near-term earnings prospects, and CVGI is likely to see a meaningful EBITDA decline in 2020.

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Commercial Vehicle: Better-Placed For The Truck Downturn Than The Share Price Suggests