Why Shyft Group Stock Is Down Big Today

What happened

Specialty vehicle manufacturer Shyft Group (SHYF 0.27%) reported better-than-expected earnings, but drastically cut its guidance for the full year. Investors are swerving toward the exit ramp, sending Shyft shares down more than 30%.

So what

Shyft, which was once known as Spartan Motors, is a designer and manufacturer of commercial, retail, and other specialty vehicles. The company earned $0.25 per share in the second quarter, $0.04 better than what analysts expected, but its $256.6 million in revenue missed consensus by about $31 million.

Sales were down 3.1% year over year, and the company's backlog of future business as of June 30 was $510.2 million, down 55% from a year ago. Operating cash flow came in at $29.7 million, a significant improvement over the $8.9 million cash outflow in the prior year.

"We delivered second quarter results in line with our expectations led by strong specialty vehicles performance while also driving robust cash generation," CEO Daryl Adams said in a statement. "We experienced challenges in the fleet vehicles and services business as market conditions deteriorated and operational inefficiencies remain. We continue to flex our operations while implementing additional cost reductions to reflect lower short-term demand."

Now what

Shyft does not expect those headwinds to clear any time soon. The company cut its full-year earnings guidance to between $0.33 and $0.76 per share, from $0.98 to $1.06 per share, and well below the $1.30-per-share consensus estimate. Revenue is now expected to come in at between $850 million and $950 million, about $150 million below previous guidance.

The company is seeing a tough demand environment both in delivery vehicles and motorhome chassis, which is likely a reflection of customer uneasiness about where the economy goes from here.

The good news is Shyft has the wherewithal to survive a bad cycle, and Adams said he expects earnings growth in 2024. But in the meantime there is not much for investors to get excited about, and the stock is selling off as a result.