Why Commercial Vehicle Group, Inc. (NASDAQ: CVGI) May Shock Wall Street


The progress of Commercial Vehicle Group, Inc. (NASDAQ: CVGI)’s restructuring has got some analysts saying that the company’s best moments are still ahead. Commercial Vehicle is working toward removing between $8 and $12 million in costs from its structure to enable it operate more efficiently.

Following Commercial Vehicle Group, Inc. (NASDAQ: CVGI)’s 1Q2016 results and the management’s comment about reducing the amount of sales required to hit breakeven, analysts at Seaport Global Securities recently moved to upgrade their rating and price target on the stock. The analysts now rate Commercial a BUY. They previously had a NEUTRAL rating on the stock. Seaport analysts also sweetened their price estimate for the stock to $5 from $3 in the previous note. The development reflects increasing hope that Commercial was getting back on track for more growth and profitability.

Breakeven target significantly reduced

The management of Commercial Vehicle recently said that the company has got to a point where it could generate profits even with sales of $150 million per quarter. Seaport previously believed that the company needed to generate sales of at least $160 million to get close to profitability.

Efficiency drive at Commercial Vehicle Group, Inc.

An aggressive efficiency drive appears to have helped Commercial Vehicle Group, Inc. (NASDAQ: CVGI) to narrow the level of sales required to attain profits. The company is in the process of cutting up to $12 million in operating costs. As part of the efforts to pare costs, Commercial will be closing one of its parts plant and lay off some 160 workers.

1Q2016 in numbers

Commercial Vehicle Group, Inc. (NASDAQ: CVGI) posted revenue of $180.3 million in 1Q2016, indicating a decrease of 18.2% from a similar quarter in the prior year. Management blamed the pullback in revenue on unfavorable forex conditions, which caused a 0.9% adverse hit on the topline figure in the latest quarter.

The impact on Commercial Vehicle’s topline was felt on the bottom-line as adjusted EPS contract to $0.10 from $0.13 in the corresponding quarter a year ago.


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