Thor Industries (THO 63.15, -1.43, -2.21%) missed second
quarter estimates by a wide margin this morning as the recreational vehicle market
leader continues to deal with an inventory correction in North America. Thor
has missed earnings estimates five quarters in a row and sales estimates two
Second quarter sales fell 34.5% on top of 24% growth last year. The company has pulled back on production as dealers continue to rationalize inventory levels following the unusually high seasonal order and wholesale delivery patterns in the first nine months of fiscal 2018. As a result, margins fell and adjusted earnings fell 54% to $0.69/share, excluding expenses related to the acquisition of the Erwin Hymer Group.
Encouragingly, dealer inventories were down 11% yr/yr at the end of the second quarter. Thor expects production and wholesale sales will be balanced with overall retail demand by the end of the normally stronger second half of the fiscal year. Thor hopes to see a resumption of growth in fiscal 2020.
The stock gapped down but quickly pared most of its losses as investors overlook the near-term weakness and hope that this cyclical business could be near a bottom. Cyclical stocks often bottom in anticipation of better things to come.
With a ~$3.3 bln valuation Thor trades at ~10x EPS and ~5-6x EV/EBITDA, which is comparable to the much smaller Winnebago (WGO).
Thor has 48% RV market share in North America. Berkshire Hathaway's (BRK.B) Forest River has roughly one-third market share, while Winnebago (WGO) has a high single digit market share.
Thor's recent $2 bln stock acquisition of the German Erwin Hymer Group gave investors some diversification. The deal made Thor the global leader in the RV market, giving the company close to a 25% revenue mix from Europe and more exposure to the motorized RV segment.
- OUR VIEW
- LEARNING CENTER