The recreational vehicle industry has been extremely strong lately, and Drew Industries (LCII -2.45%) has capitalized on robust demand for RVs by continuing to come up with innovative components and products that RV owners want in their vehicles. Coming into Thursday's third-quarter financial report, Drew investors wanted to see solid growth from the company, especially given how good conditions in the industry are right now. Drew's results included much better sales growth than most had expected, and the company thinks that RVs will remain in favor well into the future. Let's take a closer look at how Drew Industries did and what's coming down the road for the RV component manufacturer.
Image source: Drew Industries.
Drew Industries hits the gas
Drew Industries' third-quarter results showed strong growth trends continuing. Revenue was up 19% to $412 million, which far outpaced the consensus forecast for $393 million in sales. Net income once again jumped, rising by two-thirds to $29.8 million. That produced earnings of $1.19 per share, which was $0.01 less than what investors were expecting but still up sharply from year-ago levels.
Taking a closer look at how Drew's financials looked, the company's primary segments all looked strong. The original equipment manufacturing segment saw its revenue climb at a similar 19% rate to that of the overall company, with sales of travel trailers and fifth-wheels jumping by more than a fifth from year-ago levels. Drew said that industrywide growth in wholesale shipments of towable RVs contributed the majority of the growth for the segment, combined with acquisitions that added about 3 percentage points to the total. Motor-home-related sales climbed by nearly a quarter, and although revenue that Drew got from industries adjacent to the RV sector lagged somewhat, it still rose at nearly a 10% pace. Operating profit for the OEM segment was up by nearly three-quarters from year-ago levels.
Meanwhile, the smaller aftermarket segment also posted solid growth. Overall sales rose by more than a fifth, and segment operating profit was up 30%. Drew said that it has focused more of its efforts on aftermarket channels, and those efforts have been paying off for the company.
Because of its work to grow, Drew kept making progress in boosting the value of its components and products within newly manufactured RVs. Drew Industries' product line makes up $3,025 of the value of each travel trailer and fifth-wheel that RV manufacturers produce, and for motor homes, an even bigger gain of $150 brought the total figure to $1,957.
CEO Jason Lippert was happy with the way Drew has been performing. "RV industry volume continued to out-pace 2015," Lippert said, and "travel trailer sales momentum has continued as the industry attracts a new generation of RV enthusiasts." The CEO also highlighted strength in the wholesale market as signaling building momentum for the industry.
Can Drew Industries keep climbing?
Drew doesn't see any of those positive trends changing soon, and it's aiming to take full advantage of good conditions in the market as long as they last. As Lippert put it, "We will continue our efforts to develop, engineer, and build great products, as well as improving our service to all customer channels, so that each day we are the supplier of choice for the industries we serve."
In particular, Drew sees itself looking for ways to expand. The company consistently develops new and innovative products that RV customers want to see. But one area in which Drew is aiming to do even better is in seeking out new markets and new geographical locations to serve. With the potential for global growth in the industry, Drew doesn't want to miss out on what could be a huge long-term opportunity.
Drew Industries investors didn't react immediately to the news, with no immediate reaction evident in pre-market trading following the announcement. Nevertheless, for long-term investors, the success that Drew has already shown bodes well for its ability to gain market share and build profits as long as the RV market stays as strong as it is now.
