Baird on Thor: ‘Confident in Profit Outlook’
Editor’s Note: Robert W. Baird & Co. issued a client newsletter on Tuesday following release of the first quarter financial results of Thor Industries Inc. Excerpts of that newsletter folllow.
Raising estimates and maintaining $36 target price. Preliminary sales topped expectations, leaving us confident in our profit outlook. We see good value in Thor under 12x EPS (excluding nearly $3/share in cash) as macro catalysts unfold (election cycle and tax policy) and estimates trend higher (better retail and higher margin).
RV sales exceed expectations. Thor reported preliminary sales for the October quarter after the close, following its customary process. Sales of $607 million (+21%) exceeded our $591 million estimate and consensus of $586 million. RV sales increased 30% to $507 million, above our $472 million estimate. We estimate that Heartland RV added $45 million to revenue, implying organic RV growth near 19%. Bus sales fell 11% to $100 million, below our $119 million estimate.
Backlog down. The backlog declined modestly, down 22% YOY to $467 million. RV backlog fell to $254 million, down 19% from last year and down 3% sequentially. Without Heartland RV, the backlog would have been down more, of course. Bus backlog fell 25% YOY to $213 million, and fell 6% sequentially. Management noted that right-sized dealer inventory levels led to lower and more reasonable RV backlog, while bus backlog slowed due to the expiration of federal stimulus funding and tighter government budgets. We are raising our revenue estimate slightly, but maintaining our outlook for EPS of $2.50 in F2011.
Retail positive, likely hinges on tax policy. Retail improved in late summer and early fall. CEO Peter Orthwein noted, “Thor’s internal retail sales results through October continue to demonstrate solid year-over-year increases.” We see an extension of current tax policy as a potential near-term catalyst for retail demand.
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