Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Winnebago and Thor Industries Are Producing Record Sales -- Time to Buy?

Source:  Winnebago

The RV industry may be the poster boy for cyclicality. During a boom economy in 2005, Winnebago (NYSE: WGO  ) shipped 70,000 units. Flash-forward to 2009, and that figure was down 86% to just 10,000. The entire industry collapsed but seems to have bottomed that year. Others, such as Thor Industries (NYSE: THO  ) , are also recovering on the back of an industrywide rebound that is expected to be the highest in seven years.

The winning results
On June 26, Winnebago reported fiscal-third-quarter results. Revenue popped 13.5% to $247.7 million. Excluding a one-time sale in the year-ago period, revenue leaped 23.7%. Operating income jumped 52.1% and net income soared 48.6% to $11.4 million or $0.24 per diluted share.

The gains were credited from motorhome unit sales from new products and floor-plans, higher profit margins, better leverage, and a much better overall market. It was the strongest quarterly revenue the company has seen since 2005, and its growth rate was even stronger than other competitors such as Thor Industries.

The power of Thor
Meanwhile, Thor Industries reported its fiscal-third-quarter results on June 2. Sales popped 13% to $1.05 billion. Net income from continuing operations flew 13% to $55.1 million or $1.03 per diluted share. It was a record third quarter in terms of sales. The growth numbers certainly weren't bad, though they didn't register at Winnebago's pace.

Bob Martin, CEO of Thor Industries, stated that the reason results weren't even better is due to "production capacity challenges" as it ramps up its new facility. The company is seeing some short-term costs and inefficiencies as a result. He also blamed industrywide tight labor markets and a shortage of capacity at transport companies for higher costs despite the robust demand.

Bursting industry
If you ask why the demand gained for each company, executives from Winnebago and Thor Industries give a lot of credit to their great products. No doubt that's partially true, but the industry certainly isn't creating many obstacles.

According to the Recreation Vehicle Industry Association, there are many reasons why the RV business is experiencing a revival. First, the association sees a trend toward more healthy living and more access to nature and outdoor activities. Second, there is a growing perception of value. The average family of four can save between 23% and 59% on their vacation costs by using an RV. Third, RVs cater to the growing number of owners who like to travel with pets and engage in tailgating.  

Other benefits include easier access to financing and IRS allows the interest to be tax deductible as a second home mortgage interest. New advances in green technologies, lightweight RVs, and fuel efficiency have also been a plus. Also, extra busy lifestyles have resulted in shorter vacations for many people and RVs allow quick weekend getaways with little planning according to surveys.   

Too hot?
According to analysts, baby boomers are the biggest buyers, accounting for 60% of RV sales; this group is expected to continue to grow both in size and spending power... as long as the economy improves. But, if history is any guide, when the economy goes sour Winnebago and Thor Industries could see their sales get slaughtered. 

And that makes sense: When stocks are down, commission checks are cut, home values are down, and everyone's worried about the future, an RV is seen as a luxury purchase that can be delayed. Add the fact that higher interest rates mean higher payments for financing one, and that perceived cheap monthly cost goes up.

Foolish final thoughts
The recreational vehicle industry can kind of feel like a game of musical chairs. It sounds as though Winnebago and Thor Industries have great near-term and long-term futures, but the medium term is uncertain. These companies seem to be great contrarian buys to hold for the very long term. For now, it's anybody's guess where they are headed, but it looks like Winnebago may be chipping away a bit at Thor Industries' dominance.

Warren Buffett's worst transportation nightmare (Hint: It's not Tesla)
A major technological shift is happening in the automotive industry. Most people are skeptical about its impact. Warren Buffett isn't one of them. He recently called it a "real threat" to one of his favorite businesses. An executive at Ford called the technology "fantastic." The beauty for investors is that there is an easy way to invest in this megatrend. Click here to access our exclusive report on this stock.

Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 11, 2014, at 12:49 PM, jrj90620 wrote:

    I'm thinking that no one saw this article,since there are no comments.Since the article was written,gas prices have come down and make both companies business prospects better.

  • Report this Comment On December 21, 2014, at 3:46 AM, DrGoldin wrote:

    ^^^ Right, I was going to say that July might not have been the time to buy, but now is.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3014204, ~/Articles/ArticleHandler.aspx, 8/28/2015 6:43:45 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Nickey Friedman

Nickey is a select freelancer for the Fool. She writes about food & beverage, dry bulk shipping, and whatever else floats her boat. After selling four successful restaurants, she turned in her knives for a pen and now puts her passion for food, hospitality, and transportation in writing. You can send email to her at

Today's Market

updated Moments ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:05 PM
THO $54.23 Up +0.52 +0.97%
Thor Industries CAPS Rating: *****
WGO $20.42 Up +0.52 +2.61%
Winnebago Industri… CAPS Rating: ****