Rev Group (NYSE: REVG) topped Wall Street earnings expectations for the most recent quarter but lowered its outlook for the full year. Investors are focused on the bad news to come, sending shares of Rev down 14% as of 10 a.m. ET.

A recreational slowdown

Rev is a maker of recreational vehicles (RVs) and specialty trucks including ambulances and other public-service vehicles. The company earned $0.48 per share in its fiscal third quarter ending July 31, beating Wall Street's $0.42 per-share estimate. However, revenue of $579.4 million was about $40 million shy of consensus.

The specialty-vehicle segment posted a double-digit earnings before interest, taxes, depreciation, and amortization (EBITDA) margin, thanks to strong demand for fire and ambulance equipment. CEO Mark Skonieczny said that "market conditions [in RVs] remain challenged, however, we continue to be proactive in managing our cost structure to align with end market demand and deliver operating margins in line with our expectations."

The company doesn't expect conditions to improve overnight. Rev lowered its full-year fiscal 2024 revenue outlook by $50 million, to $2.35 billion to $2.45 billion, suggesting some downside to the $2.44 billion consensus estimate.

Is Rev Group stock a buy?

In theory, Rev offers a nice balance between the highly cyclical RV business and the steadier public-service vehicle business. When times are tough, consumers tend to purchase fewer big-ticket items like RVs, but demand for fire trucks and ambulances is consistent throughout the economic cycle.

Rev's model is working and the company is stable, but without the RV side, it's tough for Rev Group to outperform. Should the U.S. economy avoid a recession, there's reason to believe that RV sales will rebound as rates drop. Until more is known about the health of the consumer, it could be tough for Rev Group shares to outperform.

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