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Investment Firms Comment on Winnebago

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March 19, 2010 by   Leave a Comment

Two Wall Street firms that follow the RV industry offered somewhat different views of Thursday’s second-quarter results of Winnebago Industries Inc. But both arrived at more or less the same conclusion.

The firm of Robert W. Baird & Co. came out somewhat bullish on the stock in a client newsletter and said it was raising its forecast for Winnebago profits.

The newsletter stated in part, “Winnebago reported a smaller operating loss – suggesting lower breakeven levels than previously thought – a good sign. The backlog is robust (+246%), but better shipments reflect strong orders and inventory replenishment – not a recovery in retail (-2%). We raised our estimates to reflect lower breakeven levels and a good mix of diesel units, driving our price target to $15.”

The firm further said of Winnebago: “We raised our F2010 EPS estimate to $0.20 from a loss of $0.15 to incorporate the Q2 upside and improved profitability. We also raised our F2011 EPS estimate to $0.80 from $0.56.

Meanwhile, the Thompson Research Group halved its current fiscal year forecast, cutting it from 50 cents a share to 25 cents and its Fiscal 2011 estimate from $1.17 to 95 cents.

“We believe consumer retail demand is the most important metric in which to focus going forward, and ultimately will dictate future wholesale order trends. The primary driver for lowered FY 2010 and FY 2011 estimates was scaled back gross margin assumptions, which likely were too optimistic in the first place. We also modestly scaled back our top line assumption for FY 2011 but would add that we still are assuming a fairly robust 41% top line growth. Our analysis assumes what we believe is a 1-to-1 retail replacement in 2010. Our FY 2011 estimate assumes achieving 50% of peak volumes and operating margins less than half of peak levels. We view a $1.50 recovery EPS as a reasonable target, and assuming a conservative 15x P/E multiple implies a $22-$23 stock price. A potential flaw in our analysis hinges on the trajectory of the recovery in motorized retail sales. We continue to focus on retail sales trends in the channel, and our Q12010 RV dealer survey to be published in early April should shed additional light on the current status of retail trends.”

RVB readers who wish to keep pace on the firms’ views on these and other RV stocks are encouraged to subscribe to their services. Contact Baird at (800) 792-2473. Contact TRG at (615) 891-6203.

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