Editor’s Note: Robert W. Baird & Co. issued a client newsletter on Tuesday following release of the first quarter financial results of Thor Industries Inc. Excerpts of that newsletter folllow.
Raising estimates and maintaining $36 target price. Preliminary sales topped expectations, leaving us confident in our profit outlook. We see good value in Thor under 12x EPS (excluding nearly $3/share in cash) as macro catalysts unfold (election cycle and tax policy) and estimates trend higher (better retail and higher margin).
RV sales exceed expectations. Thor reported preliminary sales for the October quarter after the close, following its customary process. Sales of $607 million (+21%) exceeded our $591 million estimate and consensus of $586 million. RV sales increased 30% to $507 million, above our $472 million estimate. We estimate that Heartland RV added $45 million to revenue, implying organic RV growth near 19%. Bus sales fell 11% to $100 million, below our $119 million estimate.
Backlog down. The backlog declined modestly, down 22% YOY to $467 million. RV backlog fell to $254 million, down 19% from last year and down 3% sequentially. Without Heartland RV, the backlog would have been down more, of course. Bus backlog fell 25% YOY to $213 million, and fell 6% sequentially. Management noted that right-sized dealer inventory levels led to lower and more reasonable RV backlog, while bus backlog slowed due to the expiration of federal stimulus funding and tighter government budgets. We are raising our revenue estimate slightly, but maintaining our outlook for EPS of $2.50 in F2011.
Retail positive, likely hinges on tax policy. Retail improved in late summer and early fall. CEO Peter Orthwein noted, “Thor’s internal retail sales results through October continue to demonstrate solid year-over-year increases.” We see an extension of current tax policy as a potential near-term catalyst for retail demand.
To subscribe to this or other Baird newsletters, contact Craig R. Kennison CFA, firstname.lastname@example.org or call (414) 765-3870.
Thor Industries Inc. announced today (Nov. 2) preliminary sales and backlog for the quarter and three months ended Oct. 31.
Preliminary consolidated sales in the quarter were $607.17 million, up 21% from $502.55 million last year. RV sales were $506.79 million, up 30% from $389.93 million last year. Both consolidated and RV sales in the first quarter of Thor’s 2011 fiscal year include Heartland RV, acquired Sept. 16. Bus sales were $100.38 million, versus $112,.62 million last year.
Q1 results exceeded analysts’ expectations, the Wall Street Journal reported
Cash, cash equivalents and investments on Oct. 31 were $137 million. Consolidated backlog on Oct. 31 was $467 million, compared to $599 million last year. RV backlog was $254 million, versus $315 million last year. Bus backlog was $213 million versus $284 million last year.
“RV backlog is at a more reasonable level now that RV dealer inventory has been right-sized for current demand. Bus backlog is lower due to the expiration of federal stimulus funding and tight state and municipal budgets,” said Peter B. Orthwein, Thor Chairman, CEO and president. “Thor’s internal RV retail sales results through October continue to demonstrate solid year-over-year increases,” he added.
Editor’s Note: Robert W. Baird & Co. issued a client newsletter after this week’s release of the August towable sales figures by Statistical Surveys Inc. (SSI). Excerpts from the Baird Newsletter follow.
U.S. towable registrations increased 11% in August. Dealer sales of towable units increased for the sixth consecutive month in August. Total U.S. towable retail increased 11% (travel trailers up 11%; fifth-wheels up 11%) compared to an 8% drop in motorhomes. Looking to the remainder of 2010, we expect approximately 10-15% retail growth in towables, with Thor taking share.
Towable retail up 11%. Towable demand improved in August. Travel trailer registrations grew 11% while fifth-wheel demand also increased 11%. Towable sales outpaced motorhome sales which fell 8% in August.
Leaders gaining share. Thor continues to take share with retail registrations up 16% in the month. We also note that Heartland RV (No.4 market share and recently acquired by Thor [THO-$31.52-Outperform]) saw registrations increase 41%. Altogether the top five manufacturers have seen retail grow 20% YTD versus 8% YTD industry growth.
Inventory. Dealers have increased towable inventory in 2010 as towable shipments have exceeded retail sales. We believe that dealer inventory is fairly balanced at current levels and future shipments should track in line with retail demand.
Retail SAAR. We calculate a seasonally adjusted rate of retail (SAAR) registrations. The SAAR of towable demand increased to 159.K units in August from 153.6K units in July.
Recent news. Winnebago (WGO-$9.74-Outperform) indicated today (Oct. 18) that it is looking to acquire SunnyBrook RV, the No. 13 player in towables with 1% share.
To subscribe to this or other Baird publications, contact Craig R. Kennison, CFA, at email@example.com or (414) 765-3870.
Dutchmen RV announced Thursday (Oct. 14) the appointment of Tim Dunn as regional sales manager with responsibility for the Goshen, Ind.-based towables manufacturer’s Kodiak and Four Winds brands within the western sales region.
A 21-year veteran of the RV Industry, Dunn spent the majority of his career as the general manager of one of the largest dealerships in the Rockies. He also held positions with a major RV rental firm and as an independent manufactures representative for several RV brands.
“We are very excited to be able to attract Tim to the Dutchmen team,” said Ryan Thwaits, product manager for Dutchmen RV. “His years of retail and wholesale experience make him very valuable to our dealers. He understands the complexities of running a retail RV dealership — this experience will allow him to partner with his dealers and create a relationship that extends well past the point of the wholesale delivery. He also is an excellent product trainer and will work tirelessly to assure his dealers that the product Kodiak and Four Winds will retail quickly and profitably.”
Dunn cited the “strong and progressive attitude” of Dutchmen, a division of Thor Industries Inc., in making his decision. “I am honored to be given the opportunity to become a part of it and look forward to a long and rewarding career with the ‘new’ Dutchmen.”
Dutchmen RV brands include the Denali, Four Winds, Grand Junction, Aerolite, Kodiak, Voltage, Rubicon and Dutchmen brands. For more information on Dutchmen RV and its products visit www.dutchmen.com or call (574) 537-0600.
Syracuse, Ind.-based Redwood RV, a division of Thor Industries Inc., rolled its first full-time, residential fifth-wheel offline Thursday (Oct. 14). “It’s an exciting day,” said Redwood President Don Emahiser.
The Redwood line is being built in a state-of-the-art, 105,000- square foot factory and includes industry firsts like its Custom FIT chassis and Diamond Residential Furniture Line. “Basically FIT — Falcon Integrated Technology — is the foundation the RV is built on.” Emahiser said. “It’s something we’ve been working on with our suppliers to address a big concern dealers are facing when it comes to basic service.” According to Emahiser, FIT simplifies the process and gives the dealers a single point of contact for solutions.
Emahiser said Redwood’s goal is to build and market Thor’s first residential fifth-wheel for full-time lifestyles. “We plan to sit at the top of Thor’s current offerings,” said Emahiser, who formerly worked for Carriage Inc. and Starcraft RV Inc.
“This is Thor’s first venture from the ground up,” added Dave Boggs, Redwood’s director of marketing. “It’s an exciting time and a market we currently don’t play in.” The Redwood, available in three floor plans, will make its debut at the RVIA’s 48th Annual National RV Trade Show Nov. 30-Dec. 2 in Louisville, Ky. Base MSRP for the new Redwood is $65,000.
Rob Groover, general manager of the Grand Junction division of Dutchmen Manufactruing Inc., announced today (Oct. 6) the addition of Dwayne Kazmierczak to its sales team. Kazmierczak will be in charge of the Northeastern Region for the brands, according to a news release.
Kazmierczak is a twenty 25-year veteran of the RV industry, holding positions in sales and product development.
According to Groover, “Dwayne’s experience in the industry will prove to be invaluable to our company. His product knowledge, professionalism and relationships with his dealers will help continue to make Grand Junction a major force in the marketplace.”
According to Kazmierczak, “I very am excited to be part of the Grand Junction team. The product line is exceptional. I am looking forward to helping our dealers succeed with the product. Plus, I am eager to show prospective customers the benefits of being a Grand Junction dealer.”
Kazmierczak, his wife, Christine, and two daughters reside in Granger, Ind. Kazmierczak’s office is in Goshen at Dutchmen RV corporate offices.
Kazmierczak can be reached by phone at (574) 975-0653 or by e-mailing at firstname.lastname@example.org. More information on the Grand Junction and Colorado brands can be found at www.grandjunction-rv.com.
Dutchmen RV is a division of Thor industries Inc. Dutchmen RV produces several brands of towable recreational vehicles that are sold throughout the United States and Canada. Dutchmen RV brands include the Denali, Four Winds, Grand Junction, Aerolite, Kodiak, Voltage, Rubicon and Dutchmen brands.
Doug Richards has joined the sales team at Redwood RV, Thor Industries Inc.’s new high-end fifth-wheel manufacturer.
“Doug is a key hire for Redwood RV. He brings instant credibility to what we believe will be the best high-end, luxury, sales team in the industry. I love his excitement, experience, and product and market knowledge – not to mention his outstanding dealer relationships are exactly what we need to get Redwood RV moving in the right direction,” Tom Montague, national sales manager, stated in a news release.
Richards brings nearly 23 years of high-end sales experience to Redwood RV. Recently, Richards was a sales leader at Carriage RV Inc., where he excelled despite the challenging environment.
Richards currently resides in the Dallas/Fort Worth area with his wife, Lori, and their two daughters. He graduated from Southern Methodist University with a degree in marketing.
Redwood RV will debut its new products in booth 1101 in the Thor display at the 48th Annual National RV Trade Show, Nov. 30-Dec. 2at the Kentucky Exposition Center, Louisville, Ky.
Headquartered in Syracuse, Ind., Redwood RV products are distributed through dealers throughout the United States and Canada. Redwood RV is a division of Thor Industries Inc.
Komfort Corp. of Clackamas, Ore., will debut the Pacific Ridge line of travel trailers and fifth-wheels this week at the Recreation Vehicle Dealers Association (RVDA) Convention/Expo in Las Vegas, Nev.
Pacific Ridge includes four innovative travel trailer floorplans and four fifth-wheel floorplans that feature a five-way “Aluma-Kage” welded-aluminum laminated superstructure, a aerodynamic high gloss gel coat fiberglass front cap, “Thermal-max” all weather insulation package, Equa-flex suspension as well as a 6-inch radius ceiling, according to a news release.
According to Peter Kinden, vice president of sales for Komfort, “We spent the last few months working with our Komfort dealers to create a product that will stand apart from the cookie cutter products of today. In creating our new products, we are recreating our company and are keenly aware that our new products will be an indicator to Komfort dealers across the West of what our new products will stand for in the marketplace. The Pacific Ridge has been designed with features not in any other product and will be our flagship brand.”
Kinden added, “Pacific Ridge includes innovative features at a terrific value. In addition to our innovative exterior design, Pacific Ridge includes interior features that are usually only found in products at a higher price point. Solid surface countertops, 15,000 BTU AC, halogen lighting, 8- cubic-foot refrigerator, 80-inch island queen bed, Fantastic Fan and a oversized skylight with shade are just a few of the innovative features that will make Pacific Ridge a force in the market.”
Bob Schriever of Curtis RV recently previewed the product at Komfort and said, “We absolutely love the design of the new Pacific Ridge, First impressions are important and I feel that Pacific Ridge hits the wow factor dead on. It’s nice to see a manufacturer try something different and not just copy everybody else out there.” We can’t wait to introduce it to our customers.”
MSRP for travel trailers start at $26,500. MSRP for the largest unit, a 38-foot fifth-wheel still in the prototype stage, is $48,000.
Komfort Corp.was founded in 1967 and has been part of the Thor IndustriesInc. family since 1995. For more information on Komfort and its product lines, visit www.komfort-RV.com or contact Komfort sales at (503) 722-5199.
Sales for Thor Industries Inc. are on the road to recovery after being slammed by high gas prices, scarce credit and recession-racked consumers, Businessweek reported. U.S. consumers are favoring less expensive and more fuel-efficient models, analysts and industry experts say.
Americans’ willingness to spend, if not splurge, on so-called second homes on wheels could in turn provide a clue to positive trends in the broader economy.
“The RV industry is a great leading indicator for the overall health of the economy,” says Kathryn I. Thompson, founder of Thompson Research Group in Nashville, Tenn. Over the last decade, manufacturers have produced an average of 309,000 RVs a year, according to the Recreation Vehicle Industry Association (RVIA).
On Sept. 28, Thor, the largest U.S. maker of recreational vehicles, reported a 51% jump in last quarter’s sales from a year ago. Profit rose 64%, with net income exceeding by 16% the estimates of analysts surveyed by Bloomberg.
The recession took its toll on the industry. In March 2009, two of the largest RV makers — Monaco Coach and Fleetwood Enterprises — filed for bankruptcy protection.
LOOSER CREDIT, NOT GREATER DEMAND
On Sept. 24, the RVIA released August data showing that the 177,300 RVs shipped to dealers so far in 2010 had exceeded levels at this point in 2009 by 70%. In 2009, the number of RVs shipped to dealers was 58% below the 390,500 RVs shipped in the peak year of 2006, according to the RVIA.
A key factor in the RV recovery has been credit, says Robert M. “Mac” Bryan, vice president of the RVIA. Because of the credit crisis, neither consumers nor dealers could borrow to buy RVs, which in the case of motorized homes can cost at least $200,000. Much of the improvement in 2010 does not reflect a “change in demand, but an improvement in financing in vehicles,” Bryan says, as the financial crisis has eased and banks have reentered the RV financing market.
So far in 2010, the rebound in actual retail demand has been “fairly modest,” says Bret Jordan, an analyst at Nashville-based investment firm Avondale Partners. “The retail consumer never really came back in a big way,” says Jordan, who is based in the firm’s Boston office.
There are, however, signs that this could be changing. “After a tenuous summer, the season ended well,” Robert W. Baird analyst Craig Kennison wrote on Sept. 29 while unveiling the results of a survey of 104 RV dealers.
Baird’s survey showed that some parts of the RV industry are doing better than others. Sales of motorhomes rose 8% to 10% in the third quarter of 2010. Towable RVs, meanwhile, jumped 16% to 18%.
TRADING DOWN TO TOWABLE RVS
Consumers are deciding on towable RVs partly because of cost, but also because extra features have made them competitive with motorhomes, Jordan says. A “high-end towable vehicle” can cost $60,000 while a high-end motorhome with a diesel engine can be $200,000. Many new towable trailers now feature ”slide-outs” — portions of the trailer that can be expanded when parked to increase living space. “You’re getting comparable living space” to motorhomes, he says, adding: “There is a lot of utility in towables for the cost.”
In 2006, pricier motorhomes made up 14.3% of all recreational vehicles produced. So far in 2010, that share has fallen to less than 10%.
“You are seeing the trade-down effect,” Thompson says. “People aren’t necessarily giving up the RV lifestyle but they’re choosing less-expensive products.” RVs priced below $150,000 are “doing OK,” she says, while “anything below $100,000 is doing the best.”
According to Thompson, such trends could hurt Winnebago Industries Inc., the motorhome maker headquartered in Forest City, Iowa. They could favor Thor, for which towable RVs made up 70% of sales last quarter, she says. A maker of RVs under the Airstream, Dutchmen, Komfort, CrossRoads, and other brand names based in Jackson Center, Ohio, Thor announced on Sept. 17 the acquisition of Heartland Recreational Vehicles LLC, another specialist in towable RVs, for $100 million in cash and 4.3 million shares of Thor stock — or a total value of $247 million based on the recent share price. On Oct. 1, Thor said it would boost its quarterly dividend, from 7¢ to 10¢ per share.
BIG EXTRA: ADDITIONAL FLAT-SCREEN TV
Winnebago shares are down 14% so far in 2010, while Thor shares are up 9%.
To make cheaper RVs more attractive to consumers, manufacturers have piled on extra “bells and whistles,” Jordan says, like including three flat-screen televisions, instead of just two.
In response to the volatility of gas prices in recent years, RV manufacturers have made their products more fuel-efficient. “We’re seeing a great deal of attention [paid] to the greening of the RV,” Bryan says. RVs are being made of lighter materials and the efficiency of furnaces, air conditioners, water heaters, and other appliances has been improved, he says.
There are further recent indications of returning retail demand. The Pennsylvania RV and Camping Show, an annual event held in Hershey, Pa., bills itself as “America’s largest RV show.” The exhibition, from Sept. 13-19, saw record attendance that was up 9% from last year and the number of RV units on display rose 43%.
Tiffin Motorhomes, a privately held RV company based in Red Bay, Ala., told show organizers that sales were 44% higher than last year.
“People had been holding back on purchases and now they were ready to buy,” says Heather Leach, marketing and education director at the Pennsylvania RV and Camping Association (PRVCA).
RV DEALER: CUSTOMERS REMAIN “LEERY”
Exposure to the U.S. consumer is just one factor that makes the RV industry a good economic barometer, Thompson says. The industry is also affected by important credit trends, including the availability of short-term credit for dealers buying inventory and of long-term credit for customers buying RVs. The industry is also a good window into factors that affect U.S. manufacturing, such as raw material and labor costs.
The economic environment continues to concern the industry. Consumer spending rose 0.4% in August, according to data released Oct. 1 by the U.S. Commerce Dept. According to an unidentified RV dealer quoted in a Sept. 7 survey by Thompson Research Group: “Customers [remain] leery, kind of careful about everything.”
Nonetheless, industry participants say they are confident about the RV’s long-term appeal, especially as Baby Boomers retire and younger Americans seek affordable vacations. “Assuming gas prices remain reasonably affordable, it’s a cheap way to have a vacation,” Jordan says. “It’s cheaper than a second home.”
Park campgrounds are as busy as ever, Bryan says, a fact that underscores the appeal to Americans of the RV lifestyle. According to the National Park Service, the number of RV campers at National Parks rose 6.8% from 2008 to 2009. “Recreational vehicles have a very bright future,” Bryan says.
Thor Industries Inc. announced Friday (Oct. 1) that its board of directors has authorized an increase of its regular quarterly dividend to 10 cents per share. This represents a 43% increase over Thor’s previous regular dividend of 7 cents per share, Wall Street Pit reported.
The new regular dividend will be paid on Oct. 18.
Jackson Center, Ohio-based Thor manufactures and sells a range of recreation vehicles and small and mid-size buses, as well as related parts and accessories in the United States and Canada.
Shares of Thor were higher today by 74 cents, or 2.22%, currently trading at $34.14.