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Wall Street Firm: Faint Signs of RV Bottom

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May 6, 2009 by   Leave a Comment

The Wall Street investment firm Robert W. Baird & Co. sees a silver lining in this week’s quarterly report from Thor Industries Inc.

Thor reported a 41% drop in sales for the third quarter, but topped expectations on share gains and rental orders. “Backlog fell, but improved sequentially hinting at a stronger summer than we had modeled,” the investment firm reported to its clients. “Bankrupt competitors may resurface, but Thor has cut costs and accumulated cash to emerge stronger in the next cycle. We raised our price target to $21 and are looking for an opportunity to get involved.”

Thor reported preliminary sales for the quarter of $415 million, down 41% but it topped Baird’s estimate of $274 million.  RV sales fell 48% to $311 million, but “exceeded our pessimistic estimate.” Bus sales fell 3% to $104 million. RV fundamentals remain weak, but improved as the quarter unfolded. It was not as bad as feared, Baird concluded.

The backlog fell to $441 million, down 16% from $526 million last year, including a 9% drop in the RV backlog and 23% drop in the bus backlog. “Importantly, the backlog improved sequentially and implies better Q4 revenue than we had modeled – suggesting Thor will remain profitable in FY2009.,” Baird stated.

Thor improved its towable share to 31.3% year-to-date, up from 30% in 2008, the investment firm noted. “Meanwhile, Fleetwood and Monaco filed for Chapter 11 bankruptcy protection – leaving the door open to survivors like Thor. Together, Fleetwood and Monaco represented 7% of the towable market and 28% of the motorhome market in 2008. Recently, Navistar acquired assets from Monaco but has not indicated whether it plans to build RVs – so the share opportunity remains unclear.”

We have begun to see faint signs of a bottom in the RV market,” Baird stated in its industry outlook. “Dealers remain reluctant to accumulate inventory, but consumer confidence has improved – hinting at a retail bottom. Meanwhile, Thor has cut costs and accumulated cash to position itself as a lean survivor with share-gain opportunities as the market recovers.”

Baird raised  its earnings estimates for Thor based on this week’s report. It projects the company will earn 20 cents per share for the current fiscal year, up from its earlier estimate of a loss of 25 cents per share, and projects the company will earn 85 cents per share in FY 2010, up from 25 cents per share.

Thor reported $296 million in cash and equivalents at the end of the third quarter, a 19% increase over a year ago. This amount, Baird noted, will be sufficient to support acquisitions, internal growth initiatives, share buybacks and higher dividends.

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