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Baird Co.: Strong Growth Across All Categories

November 28, 2012 by · Leave a Comment 

Editor’s Note: Following this week’s release of the wholesale RV shipments report from the Recreation Vehicle Industry Association (RVIA), the investment firm of Robert W. Baird & Co. distributed a routine advisory note to its investors. Highlights of that note follow.

October RV shipments up 31%. Wholesale shipments improved 31% on strong growth across all categories. Key categories drove the robust growth, with both motorhome (Class A and C) and towable (travel trailer and fifth-wheel) shipments growing 32% in the month. The growth is consistent with elevated dealer sentiment and reportedly strong orders out of the Elkhart open house. Class A and C shipments are now up 8% YTD, and travel trailer and fifth-wheel shipments have grown 14% YTD.

Towable (TT and 5W) shipments up 32%. Travel trailer shipments grew 33%, while fifth-wheel shipments jumped 29%. The strong October growth followed robust shipments in July (+30%), August (+15%), and September (+13%). Combined, travel trailer and fifth-wheel shipments were up 14% YTD.

Motorhome (A and C) shipments grew 32%. Robust motorhome growth continued for the fourth consecutive month as Class A shipments grew 26% while Class C shipments jumped 43%. Class A and C shipments are now up 8% YTD.

Thor. October marks the third month of Thor’s fiscal 1Q13. Thor reported quarterly results on Nov. 26 — towable shipments increased 27% and motorhome shipments jumped 78%.

Winnebago. October marks the second month of Winnebago’s fiscal 1Q13. The October industry growth in motorhomes (A and C; +32%) compares favorably to our +24% expectation for Winnebago shipments.

RVIA updates shipment forecast. RVIA released its updated RV shipment forecast in conjunction with the Association’s annual National RV Trade Show. RV shipments are projected to have increased nearly 10% by the end of 2012, and 2013 shipments are projected to grow 4.5% to nearly 290K units.

To subscribe to this and other Baird reports, contact Craig R. Kennison at ckennison@rwbaird.com.

 

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Baird Expects Bullish Tone at Louisville Show

November 27, 2012 by · Leave a Comment 

Kentucky Exposition Center in Louisville, Ky., site of this week's 50th Annual National RV Trade Show

The 50th Anniversary National RV Show is barely underway and industry observers are already forecasting a bullish outlook for the industry.

Officials with Robert W. Baird & Co. are hosting a field trip to the trade show this week in Louisville, Ky., including meetings with Thor Industries Inc., Winnebago Industries Inc., Drew Industries Inc., Bank of America, Ally Bank and the Recreation Vehicle Dealers Association (RVDA).

“We expect a bullish tone driven by optimistic dealers and strong orders, underpinned by budding signs of a housing recovery,” Baird stated in a note to investors. “We will be interested to monitor retail trends, dealer sentiment, inventory, orders and margin pressure – along with the impact of macro drivers like housing, the fiscal cliff, and tax policy on discretionary wealth (including talk of changes to the mortgage interest deduction which current benefits RV buyers).”

This positive outlook comes the same day that the Recreation Vehicle Industry Association (RVIA) released its 2013 forecast, forecasting wholesale shipments will rise 4.5% in the coming year.

Baird noted the recent first quarter financial results released on Monday by Thor Industries Inc. leads the industry upturn. Highlights of that report follow:

Optimistic dealers drive solid quarter. After posting impressive preliminary sales and a robust backlog Nov. 5, Thor reported on Monday a modest EPS shortfall due to discounting and one-time items. Dealers are confident, supporting a healthy backlog and inventory growth. “We remain optimistic as negative equity evaporates (housing), but would be selective on valuation – especially as inventory grows. Industry fundamentals continue to improve, but with tax policy up for grabs and dealer inventory back in balance, we prefer to pick our spots.”

EPS shortfall. Thor reported a modest EPS shortfall ($0.58 vs. $0.61) due to one-time items ($0.63 consensus). As a reminder, Thor previously reported robust revenue growth (+30%) and a strong backlog (+41%) – driving investor enthusiasm for the stock. A legal settlement and severance costs reduced EPS by $0.02, although Thor generally emphasizes GAAP (not pro forma) EPS.

Discounting persists. Management twice referred to elevated discounting, suggesting the environment has not improved. As the industry shifts the order cycle from November (RVIA show) to September (Elkhart show), manufacturers make every effort to book business early. Again this year, Thor offered to cover floorplan costs for Elkhart orders – but only for orders placed at the show.

Dealer optimism drives inventory growth. Dealer inventory in Thor products increased 14% as dealers bet on a recovery. After a long destocking period, management characterized inventory levels as “appropriate.” Meanwhile, recent checks and strong OEM backlogs indicate a confident dealer base. The Baird RV Dealer Sentiment Index hit 68 in October (100 point scale), the second-highest reading since we began tracking the metric in 2006. Meanwhile, Thor reported a 73% jump in the RV backlog earlier this month.

 

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Baird: Thor’s Financials Reveal ‘Solid Margins’

September 28, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following the release of Thor Industries Inc.’s 4Q and year-end financials. The following offers a summary of the results.

• Overview: Earnings per share (EPS) topped expectations on solid margin performance and a lower tax rate. After several disappointing quarters in which margin fell below expectations, the lack of any surprises is a plus. Meanwhile, reports from the Elkhart, Ind., industry event suggest momentum is building, supporting an appetite for more dealer inventory.

EPS tops expectations: Q4 (July) EPS topped the consensus estimate (84 cents vs. 79 cents) and our 77 cent estimate, driven by lower taxes (+5 cents) and better bus margin (+2 cents). RV margin met our expectation (slight upside in motorhomes, slight downside in towables), a good sign given investor concerns about persistent discounting. Thor also reported robust preliminary sales (+15%) and a strong RV backlog (+48%).

Sentiment improving following Elkhart event: Thor and other leading RV manufacturers hosted an open house for thousands of dealers in Elkhart. Multiple sources indicated strong attendance, healthy orders, and enthusiastic dealers. Inventory is expanding – but lenders tell us that dealer lines of credit are underutilized as retail improves. We expect to have better information after we conclude our Q3 RV dealer survey, but it may be fair to say that dealer inventory is closer to “balanced” that “lean.”

More balanced outlook: RV stocks have surged recently (WGO up 23%, THO up 20%) as investors pursue: a derivative play on housing; improving industry trends; and an appetite for risk in a bull market. Thor’s results, the Elkhart open house and housing signals all support a more favorable outlook, in our view. Meanwhile, we like Thor fundamentals, noting its market leadership, strong balance sheet ($4/share in cash, no debt), and lack of European exposure. We are raising our price target to $38, but acknowledge likely diminishing upside from here.

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Baird: Dealers OK With Lower Inventory Levels

August 23, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following the April towable sales report from Statistical Surveys Inc. The following offers a summary of the results.

U.S. towable retail up in June. Dealer towable unit sales increased 2% in June, according to Statistical Surveys Inc.. The slight increase in June follows a strong increase in May, which was revised to +15% from +11%. Before adjusting for late-reporting states, U.S. towable retail is up 9% so far this year.

Towable demand up 2% in June. U.S. towable unit sales rose 2% in June and are up 9% YTD. Travel trailer registrations increased 2% (+10% YTD), while fifth-wheel sales grew just under 1% (+4% YTD).

Inventory. Results of our June RV dealer survey suggested that inventory has thinned after relatively aggressive stocking earlier in the year. Presently, we believe dealers are content with current inventory levels, and will reassess inventory needs as the September 18-19th open house approaches.

Thor. According to Statistical Surveys, Thor’s share of the combined travel trailer and fifth-wheel market has dipped to 38.1% from 39.2% through June. After adjusting for late-reporting states, we project Thor’s U.S. retail in May/June increased 7-10%, which compares to our expectation for 10% growth in May/June/July for Thor in North America. Given the unknown impact of July, Canada and late-reporting states, our expectation for 10% retail growth seems reasonable. Recall that Thor reported strong preliminary wholesale sales results for the July quarter, including an 18% increase in RV wholesale revenue and a 20% jump in the RV backlog (includes motorhome and towables).

Winnebago. According to the source, Winnebago is gaining a little share in towables after its Sunnybrook acquisition, albeit off a small base. Winnebago increased its YTD towables share from 0.6% to 0.8%. We expect the Winnebago brand to have a larger impact over time.

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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Baird: May Shipments Yield MH, Trailer Growth

June 25, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following the May shipments report from the Recreation Vehicle Industry Association (RVIA). The following offers a summary of the results.

May shipments up 6%. Total RV wholesale shipments improved 6% in May on growth in both motorhomes and towables. The trend represents an acceleration from a weak start to the year in motorhomes and a slowdown in towable shipments — possibly reflecting relatively lower dealer inventory in motorhomes heading into the summer months.

Towable shipments up 6%. Travel trailer shipments grew 9%, while fifth-wheel shipments fell 3%. Wholesale growth slowed in May following a stronger April (+14%). Through the first five months of 2012, towable shipments were up 11%.

Motorhome shipments up 5%. Class A shipments improved 8%, while Class C shipments grew 3%. Motorhome shipments grew in May due to lean dealer inventory and an easier prior-year comparison. Through the first five months of 2012, motorhome shipments were down 2%.

Winnebago results. Winnebago recently reported motorhome shipments flat in its May quarter, versus a 3% decline in industry shipments over the same period, implying a modest share gain in motorhomes.

SAAR. We calculate a seasonally adjusted annual rate of shipments. The SAAR of motorhome shipments increased to 30.5K units in May, from 23.6K units in April (24.8K units were shipped in 2011). The SAAR of towable shipments increased to 264K units in May, from 228K units in April (213K units were shipped in 2011).

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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Baird: Early Spring Impacts April Towable Sales

June 22, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following the April towable sales report from Statistical Surveys Inc. The following offers a summary of the results.

U.S. towable retail down in April. Dealer towable sales fell 2% in April, according to Statistical Surveys, following strong growth in February and March (keep in mind data is frequently revised upward). A mild winter and early start to spring supported demand early in the year, and could have pulled forward some demand from April.

Towable demand down 2%. U.S. towable sales dropped 2% in April. Travel trailer registrations were flat, and fifth-wheel sales fell 7%.

Inventory. Dealers stocked towable product relatively aggressively ahead of the selling season, increasing channel inventory, but dealers tell us overall inventory levels remain appropriate. We believe seasonal restocking is essentially complete, and look to spring demand to determine orders into summer.

Retail U.S. SAAR. We calculate a seasonally adjusted rate of retail registrations. The SAAR of U.S. towable demand (including fifth-wheels and travel trailers) fell to 173K units in April, from 178K units in March. Just over 160K units were sold in the U.S. in 2011.

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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Baird: March Towable Numbers ‘Encouraging’

May 21, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following the March towable sales report from Statistical Surveys Inc. The following offers a summary of the results.

U.S. towable retail remains strong in March. Dealer towable sales grew 15% in March, according to Statistical Surveys, following similar gains in February (keep in mind data is frequently revised upward). The retail growth is encouraging, and trends are consistent with our recent dealer survey, as a mild winter and early start to spring supported demand.

Towable demand up 15%. U.S. towable sales improved 15% in March. Travel trailer registrations increased 17%, and fifth-wheel sales grew 7%.

Inventory. Dealers continue to stock towable product ahead of the selling season, increasing channel inventory. We believe seasonal restocking is essentially complete, and look to spring demand to determine orders into summer.

Retail U.S. SAAR. We calculate a seasonally adjusted rate of retail registrations. The SAAR of U.S. towable demand (including fifth-wheels and travel trailers) rose to 175K units in March, from 172K units in February. Just over 160K units were sold in the U.S. in 2011.

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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Baird Q1 Survey: Traffic Strong, Sales are Mixed

April 13, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. conducted a survey of 125 RV dealers to assess recent trends during the first quarter. The following offers a summary of the results.

Retail mixed as early spring drives traffic. Traffic was strong as mild winter drove customers to the lot earlier. Retail was mixed, however, with double-digit growth in towables muted by motorhome declines. Inventory is healthy, with fewer dealers concerned about stocking levels heading into the selling season.

Mild winter drives traffic. Traffic was strong throughout Q1, according to dealers, supported by a milder winter and early start to spring. Retail remained mixed, with growth in towables (+10-12%) and declines (-2-4%) in motorhomes.

Inventory remains lean. Dealers report 103 days of towable inventory (down from 109 days last year) and 102 days of motorhome inventory (down from 118 last year). Recall, many dealers were concerned with inventory heading into 2012, having stocked up during the early fall promotions. Currently, just 18% of motorhome dealers and 26% of towable dealers consider inventory “too high.”

Dealer sentiment improving. Sentiment among dealers improved again, hitting 61 in our survey of current conditions (50 is neutral) – the highest reading in six years of tracking the metric. The improved attitude is probably attributable to better consumer confidence, lower unemployment and a good start to the season, supported by better weather.

Financing stable. Credit availability is largely unchanged. Customers with good credit scores don’t have trouble obtaining financing, but higher credit risks are still difficult to get financed. Many dealers are concerned about wholesale financing, and are frustrated with lack of availability and competition.

• Outlook. The RV stocks ran up in late 2011 and early 2012, but have pulled back in recent days as part of a broader market correction.

Note: Contact your Baird representative for a complete copy of the 40-page dealer survey.

 

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Baird: Spring Demand to Determine MH Outlook

March 16, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following the January motorhome sales report from Statistical Surveys Inc. The following offers a summary of the results.

U.S. motorhome retail declined in January. Motorhome retail sales fell 7%, according to Statistical Surveys. The drop in demand follows two consecutive months of double-digit growth, but keep in mind the November-January period is the seasonally weakest period for motorhome retail. Shipments have been down in recent months, and we believe inventories are lean. Demand during the more significant spring season should determine the shipment outlook for 2012.

Motorhome retail registrations in the U.S. fell 7% in January. Class A registrations dropped 11%, while Class C registrations grew 1%. Recall that SSI data are frequently revised upward.

Retail SAAR. The seasonally adjusted annual rate of U.S. motorhome retail registrations for January before revisions, fell to 17.1K units, from 21.5K units in December. In 2011, U.S. dealers sold 19.8K motorhomes (before revisions).

Dealer inventory. Motorhome dealer inventory bottomed a year ago, inventory built in 2010, and in 2011 wholesale unit shipments roughly matched retail sales. Channel inventory increased again in January, as dealers stock units ahead of the spring season.

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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Baird: Thor 2Q Reflects Consumers’ Good Mood

March 12, 2012 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter to investors following Thor’s second-quarter financial report. The following offers a summary of the results.

Sentiment improving as early spring emerges. Thor results were slightly ahead of expectations as lower costs offset weaker gross margins (discounting). Retail sales are off to a good start this year as a mild winter and an improving economic outlook help demand – but it is still early. Thor is positioned to take market share and dealer inventory is healthy as sentiment improves.

EPS ahead of expectations. Thor’s 2Q EPS topped our estimate ($0.25 vs. $0.24) and the $0.24 consensus forecast. Relative to our model, Thor delivered lower operating expenses, weaker gross margins and a higher tax rate.

Sentiment and sales improving. Management noted “strong” retail activity in the first two months of the year. This is consistent with our recent dealer survey as well as checks in other discretionary categories (cars, motorcycles), which have revealed an early jump in sales. It is clear that the mild winter is stimulating some early consumer interest, but improving economic trends are likely contributing as well. Notably, the RVIA’s 2012 industry shipment forecast was recently raised to +5% from -2% — a further sign of improving sentiment.

Outlook. Thor’s leaner cost structure is paying dividends and consumer confidence has improved from recent lows, stimulating renewed interest in RVs. Higher gas prices remain a risk – but we are growing more optimistic heading into the critical selling season.

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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