Recreational vehicle manufacturers Thor Industries (NYSE: THO ) , Winnebago Industries (NYSE: WGO ) , and Berkshire-Hathaway-owned Forest River have coexisted for many years earning overall fantastic profits. When one stumbles, it can be an easy opportunity for the other two grab market share gains. However, news out of Thor Industries may be sign of temporary trouble for the industry as a whole.
Why Thor is looking a bit sore
In a press release on Feb. 4, Thor Industries warned that its second-quarter sales for period ending Jan. 31 will fall short. Continuing sales were down a hair at $636.3 million compared to $636.6 million last year. Sales of the much larger towable RVs were down 9.3% to $474.1 million, while sales of motorized RVs improved 42.5%.to $162.2 million.
Analysts had been expecting sales of $718.35 million so this is a significant shortfall by $82 million. CEO Bob Martin blamed the disappointment on "severe winter weather that has plagued the Midwest this year." Severe cold and heavy snow resulted in several days of lost production. The company's supply chain was affected by the weather on the roads as certain supplies had trouble coming in and certain deliveries had trouble coming out.
The good news is that there was no indication of weak or weakening demand but rather just a temporary production issue. Backlog jumped 37.1% to $845.2 million on a year-over-year basis and even 15.3% on a quarter-over-quarter sequential basis. The bad news is that demand has been so robust that it may be difficult for Thor Industries to catch up in the next one or two quarters as it's already selling most if not all of its production. The company appears production-constrained rather than demand-constrained as backlog has been a strong and growing number for several quarters.
Winnebago has yet to announce its sales or earnings for the same period. Considering that the problems Thor Industries has experienced don't appear to be company-specific, it might be reasonable to expect Winnebago to report similar problems. Long-term, neither company should be affected much by the temporary situation, although if Winnebago had better luck it could be an opportunity for it to take some market share from its larger rival. That would potentially have long-term effects.
The RV selling season tends to be in the spring and summer. Despite this, Winnebago had sales this fall that blew away the previous warmer months. Easier financing and an improving economy caused the surging demand, according to the Recreational Vehicle Industry Association. Winnebago's fiscal quarter ends on Feb. 28, so there may be a bit of time before we learn the final effects on Winnebago unless it decides to notify the market sooner than its official earnings report. As of now, analysts expect Winnebago to report nearly $200 million in sales for the quarter.
Foolish final thoughts
If the market decides to punish either Thor Industries or Winnebago for this very temporary problem that will fix (or has fixed) itself, Fools should take a closer look. At the time of this writing, Thor Industries trades at under 12 times next year's estimated earnings while Winnebago trades at just 13 times. Both of these look cheap compared to the S&P 500 average of close to 19, while both companies have been consistently delivering annual sales, earnings, and backlog growth.
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