By
Ryan Fuhrmann, CFA
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December 8, 2006
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The party's been over for almost 10 years now at Fleetwood Enterprises (NYSE: FLE ) . After reaching an all-time high near $46 in March 1998, Fleetwood's stock has had a bumpy ride to a recent $8.38. When will the hangover end?
Not anytime soon, it appears. Fleetwood operates in two of the most unappealing industries right now: recreational vehicles and manufactured homes. The bulk of the company's misfortune has been because of homes without motors: The manufactured home industry had its bubble years in the mid-1990s. Easy credit and oversupply ran rampant in the space, leading to a blowup that ruined firms such as Conseco (NYSE: CNO ) , which was involved on the loan side. Other manufacturers such as Oakwood Homes also took a trip to bankruptcy court. Since that time, Fleetwood and peers such as Champion Enterprises (NYSE: CHB ) have ground through a decade of challenging operating conditions and anemic results.
Last year's hurricane relief efforts led to a temporary cure with the demand for manufactured homes, and sales numbers are wreaking havoc on quarter-over-quarter trends this year. Fleetwood released second-quarter results Thursday, reporting that total sales fell 16.4% from last year's quarter. It also reported another earnings loss.
That's only part of the story at Fleetwood: RVs accounted for almost 70% of second-quarter sales. This segment has been dealing with rising gasoline prices, increasing interest rates, and waning consumer confidence. The overall environment appears to be improving as prices and rates stabilize, but that didn't stop sales and income from falling for the quarter.
Demographic trends are actually quite favorable for Fleetwood's RV business. Baby boomers are starting to retire in record numbers and hitting the open road in their homes with wheels. Another benefit is that RV manufacturing isn't subject to foreign competition; only domestic firms compete in the space.
In my mind, the recreational vehicle industry has more going for it than manufactured homes. It may be a better idea to separate the two industries by looking to the pure-play firms in each, be it Champion in manufactured homes or Winnebago Industries (NYSE: WGO ) and Monaco Coach (NYSE: MNC ) in RV land. Fleetwood would benefit if either industry improves, but the chances are that one will recover faster than the other. My money would be on RVs.
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Fool contributor Ryan Fuhrmann has no financial interest in any company mentioned. Feel free to email him with feedback or to discuss any companies mentioned further. The Fool has an ironclad disclosure policy.
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