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R.W. Baird Sees ‘Decent Value’ In Thor’s Shares

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November 7, 2011 by   Leave a Comment

Robert W. Baird & Co. issued a client newsletter to investors following the towable sales report for August by Statistical Surveys Inc. The following offers a summary of the results.

Better sales/orders confirm the sky isn’t falling. Preliminary sales significantly exceeded expectations driven by strong orders at the Elkhart dealer open house. Heading into the off season, we maintain a cautious outlook as the economy struggles, but see decent value in Thor shares noting its market leadership, solid balance sheet, 2.4% dividend yield, and history of strong returns on capital.

Revenue. Preliminary sales for the October quarter improved 11%, significantly exceeding our forecast ($674 million vs. $581 million) and consensus ($594 million). For perspective, industry RV shipments fell 1% in the first two months of the quarter (towables up 1%; motorhomes down 22%).

Solid backlog. The total backlog improved 9% to $510 million, up from $467 million, driven by a better RV orders coinciding with the Elkhart dealer open house. The RV backlog improved 18%, to $300 million, consistent with our expectations. Dealers placed orders sooner this year in response to the increasingly important Elkhart industry open house in September – likely accounting for some of the strength. The bus backlog fell 1% to $210 million, slightly better than our expectations.

Raising estimates slightly. We are raising our Q1 EPS estimate a penny to 40 cents after incorporating the incremental revenue, but maintain a cautious margin outlook. As we noted in September, Thor partnered with GE to cover floorplan interest expense at the increasingly competitive Elkhart show. Still, the revenue upside inspires more confidence.

Outlook. We see the potential for Thor to earn over $3/share in a cyclical recovery in which the RV market returns to 70% of peak demand, but the odds of a robust recovery have diminished for now. Facing stubborn unemployment, heavy debt, and anemic economic growth, consumers lack the confidence that inspires an RV purchase.

This summary of a Baird research report is not intended as investment advice. To participate in Baird surveys and receive research reports, contact Craig R. Kennison, CFA, at ckennison@rwbaird.com.

 

 

 

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