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Thor Industries (THO +3%) is trekking higher following its Q3 (Apr) earnings report this morning. Thor, the world's largest RV manufacturer, reported a huge EPS beat. Revenue rose 3.3% yr/yr to $2.89 bln. While not huge growth, this broke a string of ten consecutive quarters of yr/yr revenue declines. Analysts were expecting a 7% decline. THO also reaffirmed FY25 guidance, which was welcome after EPS guidance cuts in two of the past three quarters.

• THO does not guide on a quarterly basis, but did say it expects Q4 (Jul) and Q1 (Oct) to be challenging. The current economic uncertainty has led to downward pressure on consumer confidence and has negatively impacted retail pull-through. THO is navigating what it describes as a prolonged industry downturn.
• The company noted that its history has proven its ability to weather difficult macro circumstances and to come back stronger when market conditions improve. THO described the current level of uncertainty as unprecedented, and the next two fiscal quarters will be challenging for the RV industry as a whole.
• What really drove the upside EPS results was a further emphasis on driving down its cost profile. This led to improved margins despite only modest top line growth. THO says its operating model, particularly within North America, is designed to ramp upward and downward in an incredibly efficient manner and that its Q3 performance exhibited the strength and flexibility of this operating model.
• Specifically, THO's ability to align production with retail sales helps on the cost side. THO works closely with its independent dealer partners to ensure rational inventory levels for a suppressed retail marketplace. Of note, its North American Towable segment, in particular, generated meaningful margin improvement, posting a 200 basis point yr/yr increase. However, overall margin pressures persist as THO manages through softer retail and wholesale demand in its North American Motorized and European segments.

Overall, this was not a blowout quarter by any stretch given the modest top line growth. However, it was much better than feared given that the RV industry is going through a prolonged downturn. In particular, investors were happy to see the surprise revenue growth as an 11th consecutive decline was expected. We could quibble about THO not raising EPS guidance given the huge beat, but we think it's prudent to be conservative given the post-tariff drop in consumer confidence.