For Thor Industries (NYSE:THO), anything that encourages more people to buy recreational vehicles is a positive. Between favorable demographics and falling gasoline prices, Thor has seen the RV industry look more attractive than ever, and coming into its fiscal third-quarter financial report on Monday, Thor investors were hoping that the company would be able to keep up its pace to produce strong growth. For its part, Thor had record results for the quarter, including unparalleled levels of revenue and net income. Let's take a closer look at the latest from Thor Industries and whether it can keep driving faster results in the future.
Thor puts the hammer down on growth
Thor Industries' fiscal third-quarter results sustained the strength that the industry has seen for quite a while now. Revenue from continuing operations was up 9% to $1.28 billion, which was slightly slower than the 10% growth rate that investors were hoping to see but nevertheless set a new record for the company. Net income came in at a record $79.2 million, up 25% from the year-ago quarter, and that worked out to adjusted earnings of $1.49 per share. That figure was $0.06 per share better than the consensus forecast among investors.
Looking more closely at Thor's results, the company once again produced better results in some of its segments than in others. The motorized RV segment posted sales growth of almost 21%, with the company citing strong dealer and consumer responses to new products like Thor's more moderately priced gasoline-powered entry-level motorhomes. Pre-tax income for motorized RVs jumped 22%, and segment backlog climbed by more than a third to $329 million.
By contrast, the towable RV unit didn't show as much growth, although it was also financially healthy. Sales for the segment were up just 2%, with slower sales of fifth-wheel RVs holding back lower-priced travel trailer revenue gains. However, income for the segment was up 16% thanks to a more favorable product mix, and backlogs climbed by more than half.
Dealers also continued to boost their inventories in anticipation of strong sales demand. At the end of the quarter, Thor posted total dealer inventory of 82,100 units, up 1% from the year-ago quarter.
Thor Industries CEO Bob Martin was pleased with how the company has done. "We continued to see the benefits of executing our strategic operating plan in the third quarter," Martin said, "resulting in record sales and bottom-line results. As our core markets continued to grow, we were able to generate improved margins and profitability."
What's coming down the road for Thor Industries?
Thor's future still looks bright. As its CEO noted, "We have heard consistent feedback that our dealer partners are seeing an influx of younger consumers entering our markets, which gives us optimism for the long-term growth of our business and industry." Martin also pointed to more ethnically diverse consumers as driving the need for Thor to broaden its product features and floorplans to meet more customer needs.
Still, Thor did note that there is a ceiling on how much growth investors should expect. As CFO Colleen Zuhl said, "We begin to approach production capacity constraints for certain of our brands, particularly within the towable business." However, Zuhl noted that Thor's Airstream plant expansion and investments in the Heartland facility in Idaho could increase capacity over the long run, allowing the company to capitalize more effectively on favorable industry conditions as long as they last.
Thor Industries stock didn't respond all that strongly to the report, rising about 1% in after-hours trading following the announcement. Nevertheless, with so many positives in the RV market, Thor seems well-positioned to take full advantage of strong customer demand even with the competitive pressures it will increasingly face in the future.