R.W. Baird Sees ‘Decent Value’ In Thor’s Shares
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 firstname.lastname@example.org.