In the bustling arena of electric vehicles, the best-performing stock of the year is neither a cutting-edge startup like Rivian nor an industry behemoth like Tesla. Instead, it is Blue Bird Corp., a lesser-known school bus manufacturer that has been quietly making waves.

With a market capitalization of approximately $2 billion, Blue Bird Corp. has experienced a remarkable transformation. The company's strategic pivot from traditional diesel and gas-powered buses to electric alternatives has paid off handsomely, bolstered significantly by federal government funding. As a result, shares of Blue Bird have skyrocketed, surging 116% year-to-date. This impressive performance stands in stark contrast to the declining stocks of other EV heavyweights, including Tesla, Rivian, Lucid, and various Chinese EV manufacturers.

A deeper look at Blue Bird's fiscal second-quarter earnings report, released last month, reveals the company's impressive financial growth. Revenue climbed 15% year-over-year, reaching $346 million, which surpassed analysts' estimates by nearly $50 million. More strikingly, Blue Bird's profits more than tripled, shooting up to $0.89 per share. Key to this financial success was the sale of a record 210 electric school buses within the quarter and a robust order backlog of roughly 500 electric buses, with bookings soaring 56% compared to the same period last year.

The buoyant growth in Blue Bird's electric school bus segment owes much to the U.S. Environmental Protection Agency's Clean School Bus Program. This initiative, part of the 2021 Bipartisan Infrastructure Law, has allocated $5 billion to replace diesel school buses with electric ones. As a result of this funding, electric school buses now account for 9% of Blue Bird's revenue, up from 6% last year. This figure is set to rise further as additional funding continues to flow to school districts eager to modernize their fleets.

One significant advantage for Blue Bird is that electric school buses command a much higher average selling price and superior profit margins compared to their diesel counterparts. As highlighted by Barclays research, an electric school bus can sell for over $300,000, whereas traditional school buses fetch around $100,000.

"This is an entirely different Blue Bird bus revenue and gross margin structure compared with just a year ago, with bus prices up significantly," remarked Blue Bird CEO Phil Horlock during the company's latest earnings call.

Looking ahead, industry analysts are optimistic about Blue Bird's growth prospects. Needham, for instance, has given Blue Bird a "Buy" rating with a $52 price target. Analyst Chris Pierce noted, "EV school bus growth is in the early innings. We expect continued strong demand as school districts compete for essentially free buses, with higher, known ASPs over a multiyear period allowing BLBD and industry peers time to drive costs lower before market prices take over."

In summary, Blue Bird Corp.'s strategic embrace of electric school buses has not only transformed the company but also positioned it as a leader in the rapidly evolving EV market. As government funding continues to support this shift, Blue Bird is poised for sustained growth, making it a stock worth watching for investors interested in the future of electric vehicles.