Industries (THO 97.82, -0.62, -0.62%)
is trading lower after the company missed profit estimates yesterday afternoon.
While demand for RVs remains strong, investors remain concerned about elevated inventories, increasing costs, and tough compares due to lapping strong growth seemingly late in the cycle.
Thor reported record third quarter revenues and earnings. Revenue grew 12% with Towable sales up 13% and motorized sales up 9%. However, sales were barely above consensus -- the least upside on the top-line in the last eight quarters.
Meanwhile, earnings grew 20% but missed estimates for the first time in three years. Gross margin fell 50% basis points to 14.1%.Management cited increased costs associated with warranty expenses, as slightly higher labor and material costs.
The company reaffirmed that solid economic fundamentals and consumer trends (demographics, lifestyle, affordability, and flexibility) support continued RV industry growth. The RV Industry Association expects 7% shipment growth this year to a new record of 540K units. Thor said it has a healthy, normalized consolidated RV backlog of $2.0 bln.
A recent concern has been elevated inventories among dealers. Thor said overall dealer inventory levels are generally appropriate for seasonal consumer demand, although levels were elevated as of April 30, 2018 in certain locations due to dealers' desire to carry more product going into spring selling season, unfavorable early spring weather, and added plant capacity that expedited deliveries of backlog orders.
Thor has a mid-to-high-40% market share of the retail RV industry.
With a ~$5 bln market cap, Thor trades at ~10x earnings, roughly in-line with smaller peer Winnebago (WGO).
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