This RV Maker Delivers High-Class Results

When Thor Industries (NYSE: THO  ) reported its most recent results, the market let out a yawn. But investors who only look at the overall numbers are missing out on a fantastic growth story. While it's true that this is the off-season for RV sales, one segment of Thor Industries' business is nonetheless taking off like a rocket.

Results
Thor Industries reported its fiscal first-quarter results on Dec. 2. Overall revenue inched up 5% to $800.0 million. Net income from continuing operations shot up 27% to $36.4 million or $0.68 per share.

Of the $800.0 million in revenue, the towable RV segment saw sales slip 3% to $662.9 million. While that's certainly uninspiring, the motorized RV segment saw sales explode 45% to $177.1 million.

Here's where it gets interesting
CEO Peter Orthwein pointed out that this past quarter and the next are "characterized by a more seasonally competitive environment." Of course, purchasing and using RVs tend to be more popular activities in the warmer months than the colder ones. Yet despite this, motorized RV sales actually increased sequentially by 5.3% in this fall quarter when compared to the previous summer quarter, even given an unusually cold October.

This suggests that demand for the motorized RV segment is accelerating very fast, and could be much more pronounced beginning in the spring selling season. Motorized RV sales still only made up 22% of revenue this quarter, but that's up from 15% a year ago. As motorized RV sales continue to grow as a percentage of overall sales, the impact of its contribution might increase further.

The backlog story
Backlog further paints a picture of growing demand for motorized RVs. While backlog was up significantly for both segments, the motorized RV portion is frankly going bananas. Towable RV backlog was up 13.5%, or $49.9 million, to $419.8 million. Motorized RV backlog was up a jaw-dropping 113.6%, or $166.6 million, to $313.4 million.

Motorized RV backlog is now at 42.7% of the overall total backlog. In terms of absolute dollars, the motorized backlog grew 234% higher than the towable RV backlog. At this pace, motorized RV demand could overtake towable RV demand.

Others in the industry
Judging from earnings results out of Winnebago Industries (NYSE: WGO  ) , the motorized RV market is a booming industry. For fiscal 2013, Winnebago reported adjusted net income growth of 352% to $32 million or $1.13.

You wouldn't know it by looking at its press release or even listening to its conference call, but Winnebago's towable RV segment actually had a $3.5 million operating loss for 2013 according to its 10-K filing with the SEC. It was the motorized RV segment that saved the day (and year).

Winnebago's motorhome deliveries jumped 47%. Dealer inventory grew by 38%. Winnebago attributes the reason for that in part to overall industry trends. Winnebago is seeing the highest backlog it has seen in over a decade. And most importantly, the profit margin for motorhomes is much higher than for towable RVs.

Winnebago reported that 17% of its "incremental motorhome revenue flowed through to the operating profit line." Greater sales and great profits per share makes the motorized RV segment a lucrative place to be.

What's fueling the motorized RV demand surge?
According to the Recreational Vehicle Industry Association, two things appear to be behind the surging demand.  First, motorized RVs tend to obviously more expensive than towable RVs.  As such, the improving economy is allowing some consumers to scale up.  Second, the recent availability of cheap financing has allowed consumers to afford higher-priced motorized RVs.  And, let's face it, it's less risky for the financiers, because it's a lot easier to repossess a motorized model. 

Foolish final thoughts
At first glance, you might never figure Thor Industries as a hypergrowth story. Follow the motorized RV sales and backlog and see whether it continues to rise as an overall percentage of the total. This segment is the fastest-growing and most profitable on a per-dollar basis. For Fools interested in a hidden, profitable growth story, Thor Industries deserves a peek.


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