Thor Industries Aims to Cash in on RV Demand

Image source: Thor Industries.

Cheap gasoline and a rising herd of retiring baby boomers has brought prosperity to the recreational vehicle industry, and Thor Industries (THO -0.64%) is looking to capitalize on the recent surge in demand. Although not as well-known as rival Winnebago (WGO 0.23%), Thor is a leading player in the market for motorhomes, travel trailers, and fifth-wheel trailers. Coming into its fiscal third-quarter financial report on Monday, Thor investors are hoping that the company will be able to turn favorable industry conditions into double-digit percentage growth in revenue and earnings. Let's take an early look at whether Thor Industries is likely to live up to the expectations that investors have set for the RV maker.

Stats on Thor Industries

Data source: Yahoo! Finance.

What's ahead for Thor Industries earnings?

In recent months, investors have gotten even more excited about the prospects for Thor Industries earnings, boosting their fiscal third-quarter estimates by $0.05 per share and increasing their full-year fiscal 2016 and 2017 projections by 4% to 7%. The stock has reflected that enthusiasm as well, rising 17% since late February.

Thor Industries' fiscal second-quarter results set the stage for the optimism that shareholders have about the company. A 14% rise in revenue from continuing operations helped boost net income by more than half, and adjusted earnings topped expectations by nearly a quarter per share. Favorable product mixes helped increase margin figures. A 25% growth rate for Thor's backlog pointed to promising times ahead, and rising inventory among its dealer base signaled expectations that the key spring months would continue the momentum that the RV maker has generated.

Yet Thor Industries remains focused on producing long-term growth, and that has the company focused squarely on going beyond the obvious retiree demographic to attract younger generations who seek a camping experience. Introductions of smaller products have focused on affordability and ease of driving, which are key aspects for younger drivers looking to buy an RV. At the same time, adding technological features like mobile-device controlled lighting, air conditioning, and generators give Thor's products an edge over Winnebago and some other competitors. By going after those who've typically used tents or stayed in cabins rather than looking for an RV, Thor believes it can keep growing its customer base.

At the same time, Thor doesn't want to ignore its higher-end customers. Top-of-the-line RVs can cost half a million dollars or more and include all kinds of amenities that you might not even find in your own traditional home. Many believe that the bull market in stocks over the past seven years has made buyers feel more comfortable about their financial situations, and that has opened the door to a greater willingness to spend on a premium RV.

One thing that Thor Industries investors therefore need to keep an eye on is the health of the stock market and the overall U.S. economy. Conditions have been extremely favorable for the company in recent years, with falling gas prices making RVs cheaper to operate. If investment portfolios start to lose value, or if energy rebounds and makes prices at the pump harder to swallow, then Thor could see some of the tailwinds that have pushed it forward start to dissipate.

In the Thor report, shareholders need to watch closely to see if the company is able to maintain and build on its market share. Even if the RV pie is growing larger, Thor should keep working harder to get a bigger piece of what's available. If history is any guide, then Thor has the ability to weigh its options and move forward aggressively with growth strategies designed to take full advantage of current conditions as long as they last.