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Major RV Stocks See Surge Despite Soft Market

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February 17, 2012 by   Leave a Comment

A weak job market and rebounding gasoline prices make it an unlikely time for a renaissance in the recreational vehicle trade.

But, according to a report by Investors Business Daily, the industry’s top players are on a tear.

Thor Industries Inc. shares climbed in eight of the past nine weeks, posting a gain of about 50% since a Nov. 29 low. Winnebago Industries Inc. gained in nine of the past 11 weeks, and is up more than 65% from a Nov. 25 low.

Manufactured housing and park model builder Cavco Industries Inc.’s stock rose five of the past eight weeks, and has added more than 45% since Dec. 19 and more than 80% since Aug. 10. Drew Industries, an RV amd MH components supplier, spiked 8% Monday after a fat fourth-quarter earnings win.

On Feb. 2, Thor released preliminary results for its fiscal second quarter, pointing to 12% overall sales growth. The company gave no sales forecast, but analysts’ consensus estimate calls for a 140% EPS gain when the company reports March 5.

A statement from Chairman, CEO and President Peter Orthwein cited some positive trends.

“Sales momentum remains strong,” he said, adding that results from January trade shows indicated “rebounding consumer confidence, access to credit and low interest rates.”

Brett Jordan, an analyst with Avon Partners, said a large piece of Thor’s momentum owed to a promotion with GE Capital. Starting in mid-September, around Open House in Elkhart, Ind., GE and Thor combined to cover the interest on loans to dealers restocking their floor inventories.

“You could argue that there was a fair amount of unseasonable demand for their product since the dealers were being subsidized to take it,” Jordan said.

Jordan also sees a cyclical component to the stock’s gains. That would help explain why shares of Winnebago, which did not participate in the promotion, are also going great guns.

Craig Kennison, analyst with R.W. Baird & Co., says recreational vehicle stocks often act as an early economic indicator, and the gains could be tied to a changing stance among larger investors. Kennison said he’d been fielding calls from active investors “doing fresh work on the sector,” possibly linked to rising consumer-confidence data.

“More broadly, we’ve seen investors shift from a defensive profile to a more aggressive stance, which has helped the riskier side of the consumer space,” he wrote in a report.

 

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