Ahead of the Bell: Analyst bearish on RV makers

The business environment for recreational vehicle makers, already weakened by a sluggish economy and high gas prices, is likely get worse before it gets better, an analyst said Monday.

RBC Capital Markets analyst Edward Aaron cut his price targets and estimates on Thor Industries Inc. and Drew Industries Inc. in a note to investors, saying "extreme demand weakness" resulted in "dreadful" shipments in June.

Aaron said the Recreational Vehicle Industry Association reported a 56 percent decline in combined class A and C motor home shipments in June, while travel-trailer and fifth-wheel sales fell 25 percent.

"Although the recent pullback in oil prices is a helpful development, we do not see any sign of fundamental improvement in the space at this point," Aaron wrote. "Winnebago Industries Inc. is still our preferred way to play the industry from a long-term value perspective, but we believe fundamentals are likely to get worse before they get better."

Aaron trimmed his earnings outlook on Thor through 2009 and cut his price target to $23 from $30. Shares of Thor closed Friday at $22.18.

He similarly lowered his outlook on Drew and reduced his target to $18 from 28. The stock ended the week at $17.99.

Aaron maintained a "Sector Perform" rating on both stocks. Shares of the companies have fallen by more than a third since the start of the year.