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Baird: Weather, Gas Impact May Coach Sales

July 14, 2011 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter following the May motorhome retail sales report from Statistical Surveys Inc. Excerpts from the Baird newsletter follow.

U.S. motorhome demand down in May. Motorhome sales fell 3% in May, according to Statistical Surveys. We expect elevated gas prices, unfavorable weather and weak consumer confidence put pressure on results. With dealer inventory at appropriate levels, shipments increasingly depend on better retail results to drive the recovery.

• Motorhome retail registrations in the U.S. fell 3% in May. Class A registrations decreased 3%, while Class C registrations also fell 3%. A cold, rainy spring, likely hurt demand in the seasonally strong month. Elevated gas prices and the related effect on consumer confidence were also a headwind.

• Gas/Diesel. Class A-Gas growth (+7%) continues to support weak demand for Class A-Diesel units (-15%).

• Retail SAAR. The seasonally adjusted annual rate of motorhome retail registrations for May before revisions, fell to 19.7K units, from 23.3K units in April. In 2010, U.S. dealers sold 19.5K motorhomes.

• Dealer inventory. Motorhome dealer inventory bottomed a year ago, and in 2010 wholesale unit shipments outpaced retail sales by roughly 6%. Dealers continued to restock units in May, as shipments outpaced retail. We expect dealers to manage inventory more conservatively following the seasonally strong spring/summer 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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Baird: Weather, Gas Impact April Coach Sales

June 16, 2011 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter following the April motorhome retail sales report from Statistical Surveys Inc. Excerpts from the Baird newsletter follow.

Action
U.S. motorhome demand was down in April. Motorhome sales fell 6% in April, according to Statistical Surveys. We believe unfavorable weather, elevated gas prices and continued weak consumer confidence put pressure on results in early spring. With dealer inventory near equilibrium, shipments increasingly depend on better retail results to drive the recovery.

Summary
• Motorhome retail registrations in the U.S. fell 6% in April. Class A registrations decreased 11%, while Class C registrations fell 2%. The late arrival of spring in most regions likely pressured retail sales in the month. Elevated gas prices and the related effect on consumer confidence were also a headwind.

• Winnebago retail: Through the first two months of the Winnebago quarter ended in May, Winnebago sales were down 11%, versus our full-quarter estimate of plus 10%. So, Winnebago would need a better May, or stronger Canada results to make up for the shortfall. The current trend implies a retail downside near 1,300 units versus our 1,527-unit estimate. Keep in mind, the SSI data is frequently revised upward, which would close this gap.

• Dealer inventory: Motorhome dealer inventory bottomed a year ago, and in 2010 wholesale unit shipments outpaced retail sales by roughly 6%. Dealers continued to restock in April, as shipments of 2,600 units outpaced retail of 2,200 units.

• Important note. Data for certain months is incomplete due to reporting delays from Maine and Minnesota. We caution against attaching undue significance to data from a single month. The data tend to fluctuate from month to month, and are frequently revised.

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 Tops Forecast, Margins Improve

June 10, 2011 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter following Thor Industries Inc.’s 3Q financial report. Excerpts from the Baird newsletter follow.

Action
Margin recovery under way: Thor beat expectations as margin recovered – reversing a discouraging trend that had some investors on the sidelines. Until the pace of retail demand improves, we expect some discounting to persist – but our earnings per share (EPS) estimate of $2.06 in F2011 and $3 in a recovery scenario still seem reasonable. Big picture, we like Thor for patient investors as our cyclical thesis unfolds – but note that the recovery has slowed with the economy.

Summary
• EPS upside: EPS topped our estimate ($0.72 vs. $0.68) and the consensus forecast ($0.67). Recall that Thor already reported preliminary sales (+25%), which topped our forecast ($849 million v $835 million) due to healthy dealer demand (+11%) and the Heartland RV acquisition.

• Margin recovers as discounting abates: Operating margin recovered on better volume and smaller discounts – a significant trend reversal after a string of disappointing quarters. Our checks indicate that some discounting persists, but has stabilized. Thor raised prices in February and has worked to manage promotional spending better recently.

• Outlook: Our investment thesis and $38 target price hinge on a cyclical recovery that has yet to gain momentum. In a reasonable scenario in which the RV market returns to 70% of peak demand scenario, we see the potential for Thor to earn over $3 per share. However, despite easier credit, debt-laden consumers appear to have little appetite for more – especially with higher gas prices and weak employment trends.

Details
• Industry Wholesale and Retail: Towable and motorhome shipment growth moderated through the back half of 2010 and into early 2011 on tougher comps due to restocking in early 2010. Retail growth has remained modest in early 2011, and with the bulk of the selling season just beginning, the recovery has been weaker than previously expected as consumer confidence and gas prices weigh on demand.

Q3 Summary
• Dealer Inventory: Contingent floorplan liability, a proxy for dealer inventory levels, increased 41% year-over-year (YOY) to $841 million (up 7% sequentially). After bottoming in 2010, we believe dealer inventories are at appropriate levels, evidenced by dealers’ willingness to stock units into the spring selling season. Going forward, we expect wholesale restocking at a 1:1 rate with retail sales.

• Backlog: Total RV backlog fell 5% YOY and 9% sequentially to $427 million. Towable backlog fell 3% YOY from record levels last year, but was up 5% sequentially. Motorhome backlog fell 14% YOY and 45% sequentially from elevated levels last quarter. The total RV backlog represents 58% of our next-quarter RV revenue estimate. The bus backlog fell 6% YOY and 7% sequentially to $206 million.

• Balance Sheet and Cash Flow: Thor ended the quarter with $59 million ($1.06/share) in cash and investments. The company has no debt. Balance sheet inventory increased 32%, with some inventory growth attributable to the Heartland acquisition.

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: Class C Shipments Fuel April Upswing

May 31, 2011 by · Leave a Comment 

Editor’s Note: Robert W. Baird & Co. issued a client newsletter following the report on RV shipments for April by the Recreation Vehicle Industry Association (RVIA). Excerpts from the Baird newsletter follow.

Action

April shipments up 2%. Total RV shipments increased 2% in April, as motorhome shipments increased 8%, while towable shipments increased just 1%. Growth weakened from March, as dealers slowed restocking rates into the beginning of the retail selling season. Dealer inventory remains in good shape and as replenishment rates stabilize, we expect shipment growth to closely track retail demand in 2011.

Summary

We regularly compile and report monthly RV data as they are released. This research note, based on data released by RVIA, is part of that series.

•Total RV shipment growth slows in April. Overall shipments grew just 2% in April following strong shipments in March (+17%). Dealers tell us inventories are appropriate, having built normal seasonal inventory ahead of the stronger spring selling months. For the remainder of the year we expect wholesale shipments to track relatively in line with retail demand.

•Motorhome shipments increased 8%. Class A shipments were unchanged while Class C shipments increased 15%. We continue to expect modest motorhome shipment growth into spring against difficult comps, with retail results determining shipment growth during the season.

•Towable shipments up 1%. Travel trailer shipments increased 1% while fifth wheel shipments were flat. Year-to-date towable shipments are up 7%.

•SAAR. We calculate a seasonally adjusted annual rate of shipments. The SAAR of motorhome shipments increased to 26.6K units in April, from 26.4K units in March (23.6K units were shipped in 2010). The SAAR of towable shipments dropped to 198.8K units in April, from 231.8K units in March (199.2K units were shipped in 2010).

We caution against attaching undue significance to data from a single month. The data tend to fluctuate from month to month.

When referring to motorhomes, we generally mean Class A and Class C motorhomes (excluding Class B). When referring to towables, we generally mean fifth wheels and travel trailers (excluding truck campers and folding campers). When referring to RVs, we generally mean Class A, Class C, fifth wheels, and travel trailers. These refined classifications provide better comparisons to the companies we cover.

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 Weather Hinders Coach Sales

May 20, 2011 by · Leave a Comment 

Baird logo Editor’s Note: Robert W. Baird & Co. issued a client newsletter following the report on motorhome sales for the first quarter by Statistical Surveys Inc. Excerpts from the Baird newsletter follow.

Action
U.S. motorhome demand down modestly in March.
Motorhome sales fell 1% in
March, according to Statistical Surveys, but Thor Industries Inc. (+16%) fared better, likely due to
rental shipments. We believe weather was a headwind in the month. The shape of
the recovery has been flatter than originally expected, and we continue to believe
improved retail demand will drive shipment growth, as dealer inventories have
bottomed.

Summary
• Motorhome retail registrations in the U.S. fell 1% in March. Class A
registrations decreased 2%, while Class C registrations were unchanged. The late
arrival of spring in most regions was probably a headwind to retail sales in the
month.

Gas/Diesel: Class A-Diesel registrations fell 24% while Class A-Gas registrations
increased 21%.

Rental units: Rental companies purchased 290 rental units in March (285 Class Cs
and 5 Class As), versus 238 rental units in March of last year. Excluding this
increase, consumer demand fell almost 5% in March.

Dealer inventory: Motorhome dealer inventory bottomed a year ago, and in 2010
wholesale unit shipments outpaced retail sales by roughly 6%. Dealers continued to
restock in March, as shipments of 2,700 units outpaced retail of 1,800 units.

Important note: Data for certain months is incomplete due to reporting delays from
Maine and Minnesota. We caution against attaching undue significance to data from
a single month. The data tend to fluctuate from month to month, and are frequently
revised.

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Baird: Gas Prices Slow Anticipated RV Recovery

May 5, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co. issued a client newsletter following this week’s release of the first quarter results of Thor Industries Inc. Excerpts from the Baird newsletter follow.

Action

Revenue tops forecast. Preliminary sales topped our forecast ($849 v $835), including upside in RVs and specialty vehicles. Backlog fell against an unusually strong comparison, but appears consistent with our outlook. Margin remains the key. As discounting abates and a February price increase kicks in, we expect profitability to improve. Our checks with industry contacts indicate the pace of the retail recovery has slowed (gas prices), but we see decent value in Thor near $30.

Summary

Solid results. Thor reported preliminary sales for the April quarter. Sales of $849 million (+25%) exceeded our $835 million estimate. RV sales increased 32% to $739 million, above our $730 million estimate. We estimate that Heartland RV added $117 million to revenue, implying organic RV growth near 11%. Industry RV shipments improved 10% in the first two months of the quarter, with towables up 9% and motorhomes up 18% in February and March. Specialty vehicle sales dropped 10% to $109 million as stimulus spending shrinks, but topped our $104 million estimate.

Margin improving? Management cited commodities and other cost pressure in its release, suggesting that margin pressure has not completely vanished. Still, we believe promotional activity has abated. Meanwhile, a February price increase – which also applied to the backlog – should result in better margin after a disappointing first half.

Backlog OK. The total backlog fell 5% YOY to $633 million and is at the lower end of our expected range. The RV backlog decreased to $427 million–down sequentially and below elevated levels last year–but remains healthy as pace of wholesale delivery improves. The specialty vehicle backlog fell sequentially and YOY to $206 million.

Outlook. We maintain a bullish consumer outlook as credit eases, but our checks indicate the pace of the recovery has been slower than anticipated – a concern we attribute to higher gas prices. Still, near $30, we like Thor for value investors as our cyclical thesis unfolds and discounting abates.

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: Gas Prices the RV Shipments ‘Wild Card’

April 27, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co.  issued a client newsletter following release of the wholesale RV shipments report by the Recreation Vehicle Industry Association (RVIA). Excerpts of the Baird newsletter follow.

Action

March shipments up 17%. Total RV shipments increased 17% in March, as motorhome shipments increased 29%, while towable shipments increased 16%. Growth improved from February, as dealers continue to stock inventory through the beginning of the spring retail selling season. Dealer inventory remains in good shape and as replenishment rates stabilize, we expect shipment growth to closely track retail demand in 2011 – with gas prices the wild card.

Summary

Total RV shipment growth improves in March. Overall shipments grew 17% in March following flat shipments last month. Dealers tell us inventories are appropriate, having built normal seasonal inventory ahead of the stronger spring selling months. For the remainder of the year we expect wholesale shipments to track relatively in line with retail demand.

Motorhome shipments increased 29%. Class A shipments increased 17% while Class C shipments increased 44%. We continue to expect modest motorhome shipment growth into spring against difficult comps, with possible upside from better retail.

Towable shipments up 16%. Travel trailer shipments increased 18% while fifth-wheel shipments grew 12%. Year-to-date towable shipments are up 10%.

SAAR. We calculate a seasonally adjusted annual rate of shipments. The SAAR of motorhome shipments increased to 26.4K units in March, from 24.1K units in February — 23.6K units were shipped in 2010. The SAAR of towable shipments increased to 231.8K units in March, from 207.5K units in March — 199.2K units were shipped in 2010.

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: Towable Sales Up 12th Straight Month

April 18, 2011 by · Leave a Comment 

Baird logo Editor’s Note: Robert W. Baird & Co. issued a client newsletter following last weeks release of  Statistical  Survey Inc.’s report on February towable RV sales. Excerpts of the Baird newsletter follow.

Action

U.S. retail up 5%. Dealer sales of towables increased for the 12th consecutive month in February. Total U.S. towable retail increased 5% (travel trailers up 6%; fifth-wheels up 3%). We expect retail growth to continue through the 2011 selling season on a stronger consumer (wealth effect, easing credit), recognizing the risk from volatile gas prices.

Summary

Towable retail up 5%. Towable demand improved again in February. Travel trailer registrations grew 6%, while fifth-wheel demand increased 3%. Towable sales continue to outpace motorhome sales, which fell 15% in February.

Leaders gaining share. Thor retail growth was more in line with the overall industry in February, having outpaced the industry significantly in past quarters. Altogether, the top five manufacturers saw retail grow 7% in February versus 5% industry growth, as the strong manufacturers continue to take share.

Inventory. Dealers have increased towable inventory throughout the winter as shipments have exceeded retail sales each of the last five months. Dealers in our recent survey indicated that channel inventory is fairly balanced at current levels and we expect future shipments to track in line with retail demand, excluding seasonal fluctuations.

Retail U.S. SAAR. We calculate a seasonally adjusted rate of retail registrations. The SAAR of U.S. towable demand remained stable at 142K units in February. Just over 150K units were sold in the U.S. in 2010.

The following chart from the Baird report shows seasonally adjusted retail demand for travel trailers and fifth-wheels over the past four years:

109748_e11452ba-e338-47c9-803c-e349c9025f63This 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: Weather Was Severe February Headwind

April 13, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co. issued a client newsletter following the release of the February motorized RV sales report by Statistical Surveys Inc. (SSI). Excerpts from the Baird newsletter follow.

Action

U.S. motorhome demand falls in February. Motorhome sales fell 15% in February, according to Statistical Surveys, but Winnebago (+13%) and Thor (+3%) fared better. We believe weather was a headwind in the month. We continue to like the macro backdrop for RVs (wealth effect, tax policy, consumer confidence) and expect credit to loosen, supporting stronger demand in 2011. Conversations with industry participants support this outlook, with gas prices and dealer inventory among key concerns.

Summary

Motorhome retail registrations in the U.S. fell 15% in February. Class A registrations decreased 11%, while Class C registrations dropped 21%. Severe winter weather was a headwind to retail sales in the month. Note that Winnebago has already reported implied retail sales up 22% for its quarter ended February.

Gas/Diesel. Class A-Diesel registrations fell 31% while Class A-Gas registrations increased 13%.

Retail SAAR. The seasonally adjusted annual rate of motorhome retail registrations for February before revisions, fell to 16.2K units, from 17.5K units in January. In 2010, U.S. dealers sold 19.5K motorhomes. The pace is slower than we anticipated, but off-season trends can be misleading.

Dealer inventory. Motorhome dealer inventory bottomed a year ago, and in 2010 wholesale unit shipments outpaced retail sales by roughly 6%. Dealers continued to restock inventory in February ahead of the selling season, ordering 1,900 units and selling 1,200 units in the month.

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: Inventory Lean in Powersports Sector

April 12, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co. issued a client newsletter recently concerning the powersports business.

Action

We contacted powersport dealers to assess recent trends. Retail and traffic was mixed in Q1 as a prolonged winter benefited snowmobile sales at the expense of ATV/SXS traffic. Inventory remains lean across most powersport categories, setting up more normal restocking going forward. Sentiment remains a concern as rising gas prices weigh on consumer confidence. However, we maintain a positive outlook on the consumer in 2011 as overall consumer credit eases and wealth recovers.

Summary

Retail/Traffic. Dealer traffic remains spotty but trends improved in Q1. The prolonged and snowy winter generated a flurry of snowmobile traffic in Q1, but chilled ATV and SxS activity in some markets. Retail trends followed suit as robust snowmobile sales offset flat (SxS) to down (ATV) off-road vehicle demand. Strong winter snowmobile demand should drive solid orders and shipments later in 2011. Snowmobile sales represent a larger mix of sales for Arctic Cat (40%) than Polaris (10%). We detected relative strength in utility-oriented SxS (corn prices?) versus recreation-oriented SxS units.

Inventory remains lean. Inventory remains healthy across most categories, according to dealers. Less than 20% of dealers reported their inventory was “too high” with respect to ATVs, SXSs and motorcycles. We see just a trace of leftover snowmobile inventory after a good season.

Finance trends. Retail credit availability continues to improve modestly, but several dealers noted problems getting customers approved. The improvement in powersport credit conditions seems to be lagging other consumer categories (RVs, automobiles).

2011 Outlook. Dealers expect powersport industry retail sales up in the mid-single-digits for 2011, with relative strength in snowmobile and SxS units as ATV sales continue to lag. The mix shift to SxS favors Polaris, the market leader in the fast-growing category – while robust snowmobile sales helps Arctic Cat. Meanwhile, the low level of dealer inventory should enable retail sales to convert to wholesale orders quickly – leaving us comfortable with our estimates for Polaris and Arctic Cat. Incrementally, we continue to monitor the impact of the tragedy in Japan, where several powersport manufacturers are headquartered. Most have major operations in the U.S. – so any disruption would depend upon the extent to which the supply chain extends into Japan – a bigger risk for Japanese-based competitors.

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Baird & Co.: ‘Spring Season off to a Mixed Start’

April 6, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co. issued a client newsletter this week based on its first quarter survey of 117 RV dealers. Excerpts from the newsletter follow.

Action

Spring season off to mixed start. We contacted 117 RV dealers to assess retail trends. Dealers reported mixed traffic in the January-March quarter citing weather, gas prices and a cautious consumer (confidence dropped 9 points in March). Still, retail improved in motorhomes (+5%) and towables (+10-15%) as the economy recovers. We continue to monitor gas prices, but see good value heading into the prime selling season – especially in Thor as discounting pressure abates.

Summary

Retail solid, not spectacular. Dealers report better retail results for the January-March quarter, but the pace of growth has slowed. Many dealers cited poor weather, higher gas prices and the broader drop in consumer confidence to explain weaker traffic. Still, towable sales improved (+10%-15%), in keeping with our outlook. Motorhome sales also improved (+5%), but at a slower pace than we had anticipated. Keep in mind that Winnebago already reported retail results through February (+22%) and appears to be taking share. Seasonally, retail trends become more important in the Apr-Jun quarter.

Inventory stable and lean. Dealers remain comfortable with inventory ahead of the spring selling season. Roughly 20% of dealers consider inventory “too high,” a healthy sign. Inventory turns remain solid for motorhomes (115 days) and towables (107 days).

Orders support our outlook. With lean inventory and better retail, dealers plan to order 15-20% more RVs in the next six months (versus last year), supporting our shipment outlook through the summer. Beyond that, retail trends hold the key to further growth.

Sentiment deteriorating on higher gas prices. Dealer sentiment fell in Q1, driven by higher gas prices, lower consumer confidence and international turmoil (tension in the Middle East and North Africa and tragedy in Japan). Big picture, we see risk in higher gas prices and home values remain underwater – but see upside as wealth recovers, unemployment drops and credit eases.

Discounting is abating. Dealers report that promotional activity has slowed, consistent with our outlook for Thor Industries Inc. We hosted management from the company this week. Unexpectedly weak margins have created an opportunity in Thor shares, in our view, setting up a favorable catalyst as margin improves. Although some margin pressure likely leaked into Thor’s April quarter, we are confident the recent 3% price increase has held.

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Baird: Shipments to Track ’11 Retail Demand

March 30, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co. issued a client newsletter following the release of the February wholesale shipments report by the Recreation Vehicle Industry Association (RVIA). Excerpts from the Baird newsletter follow.

Action

February shipments up 1%. Total RV shipments increased 1% in February, as motorhome shipments increased 6%, while towable shipments were flat. Growth decelerated versus recent months; however, this was expected. Dealer inventory is in good shape and we expect shipments growth to closely track retail demand.

Summary

Total RV shipments show slight growth in February. Overall shipments grew 1% in February following 15% growth last month. The deceleration was expected given difficult comps and healthy dealer inventory levels. Dealers have built normal seasonal inventory ahead of the busy spring selling months and for the remainder of the year we expect wholesale shipments to track in line with retail demand.

Motorhome shipments increased 6%. Class A shipments increased 10%, while Class C shipments were flat. We expect modest motorhome shipment growth into spring against difficult comps, with possible upside from better retail.

Towable shipments flat. Travel trailer shipments declined 2%, while fifth-wheel shipments grew 4%. Year-to-date towable shipments are up 6%.

SAAR. We calculate a seasonally adjusted annual rate of shipments. The SAAR of motorhome shipments fell modestly to 24.1K units in February, from 24.7K units in January — 23.6K units were shipped in 2010. The SAAR of towable shipments increased to 207.5K units in February, from 194.4K units in January — 199.2K units were shipped in 2010.

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 & Co. Likes the Macro Backdrop for RVs

March 22, 2011 by · Leave a Comment 

Baird logoEditor’s Note” Robert W. Baird & Co. issued a client newsletter following last week’s release of the January retail sales figures for motorized RVs by Statistical Surveys Inc. (SSI). Excerpts from the Baird newsletter follow.

Action

U.S. motorhome demand up in January. Motorhome sales rose 3% in January, according to Statistical Surveys, but Winnebago (+20%) fared better. Note that it is the off-season, so the growth is less significant. Big picture, we like the macro backdrop for RVs (wealth effect, tax policy, consumer confidence) and expect credit to loosen, supporting stronger demand in 2011. Conversations with industry participants support this outlook, with gas prices and dealer inventory among key concerns.

Summary

Motorhome retail registrations in the U.S. rose 3% in January. Class A registrations increased 4%, while Class C registrations increased 1%.

Gas/Diesel. Class A-Diesel registrations fell 12% while Class A-Gas registrations increased 26%.

Retail SAAR. The seasonally adjusted annual rate of motorhome retail registrations for January before revisions, fell to 17.3K units, from 19.0K units in December. In 2010, U.S. dealers sold 19.5K motorhomes. The pace of growth is slower than we anticipated, but off season trends can be misleading. Meanwhile, Winnebago (+20%) posted stronger growth.

Dealer inventory. Motorhome dealer inventory bottomed a year ago, and in 2010 wholesale unit shipments outpaced retail sales by roughly 6%. Dealers continued to restock inventory in January ahead of the selling season, ordering 1,900 units and selling 1,100 units in the month.

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: Leaders Outsold Industry Average in Jan.

March 21, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co. issued a client newsletter following release of the January towable retail sales figures by Statistical Surveys Inc. Excerpts of the Baird newsletter follow.

Action

U.S. retail up 14%. Dealer sales of towables increased for the 11th consecutive month in January. Total U.S. towable retail increased 14% (travel trailers up 18%; fifth-wheels up 7%). Retail growth was modest throughout 2010 and entering 2011. We expect a stronger recovery for the 2011 selling season on a stronger consumer (wealth effect, easing credit), recognizing the risk from volatile gas prices. Both Thor and Winnebago have reported results that include January.

Summary

Towable retail up 14%. Towable demand improved again in January. Travel trailer registrations grew 18%, while fifth-wheel demand increased 7%. Towable sales continue to outpace motorhome sales which increased 3% in January. We also note that it is the seasonally less significant off-season.

Leaders gaining share. Thor continues to take share, with retail growth of 19% in January. Thor retail registrations increased 21% for its quarter ended January versus towable industry retail growth of 13% in the quarter. Altogether, the top five manufacturers saw retail grow 20% in January versus 14% industry growth.

Inventory. Dealers have increased towable inventory throughout the winter as shipments have exceeded retail sales each of the last four months. Dealers in our recent survey indicated that channel inventory is fairly balanced at current levels and we expect future shipments to track in line with retail demand, excluding seasonal fluctuations.

Retail U.S. SAAR. We calculate a seasonally adjusted rate of retail registrations. The SAAR of U.S. towable demand fell to 137K units in January from 145K units in December. Just over 150K units were sold in the U.S. in 2010.

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: Surprised by Winnebago’s Mixed Results

March 21, 2011 by · Leave a Comment 

Baird logoEditor’s Note: Robert W. Baird & Co. issued a client newsletter following last week’s release by Winnebago Industries Inc. of its quarterly results. Excerpts from the Baird newsletter follow.

Action

Disappointing quarter provides opportunity under $14. Shares fell over 12% after Winnebago posted weak shipments. We expected better revenue – but emphasize that dealer sales topped our forecast, keeping dealer inventory exceptionally lean. The dynamic points to better shipments in future quarters and no material change to our full-year estimates. Meanwhile, our cyclical thesis remains sound as credit eases and the economy recovers. We like the stock under $14.

Summary

Weak shipments drive shortfall. Shipments (-18%) fell short of expectations (909 v 1,186), driving a surprising revenue miss in light of industry data indicating wholesale shipments actually had increased 26% for the first two months of the quarter. EPS beat our estimate ($0.11 v $0.06) due to a favorable adjustment to inventory (+$0.09), a better mix, and less promotional spending.

Retail recovery is on track. Retail improved 22% and topped our forecast (796 v 752). We believe easier credit and better consumer confidence are lifting the industry, while Winnebago takes share. It is too early to draw conclusions, but the trend supports our outlook heading into spring.

Strong retail + weak shipments = lean inventory. Dealer inventory remains lean. Better retail and slower shipments caused dealer inventory to fall well below our expectations (2,179 v 2,500), up only 8% against a 22% jump in retail. We expect the replenishment rate to hover near 1:1, but dealers would need to accelerate orders if the pace of retail picks up. The backlog finished at 957 motorhomes, near the high end of our expected range (800-1,000).

Looking at the Sunny(Brook) side. Given stronger retail and lean inventory, we remain comfortable with our estimates despite rising gas prices and long-term deleveraging trends. Industry shipments averaged 49K units over the last 22 years, peaking at 69K twice. Our model anticipates a recovery to 30K units as credit eases, but Winnebago could earn $1.25-$1.50 near 40K.

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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