In this segment from Market Foolery, Chris Hill is joined by Bill Barker from Motley Fool Funds to discuss the latest quarterly results from recreational vehicle manufacturer Camping World Holdings (NYSE:CWH).
The stock has traded down slightly since Camping World missed analyst estimates by a small margin. Find out what investors need to know about the outlook for this company and the RV industry at large.
A full transcript follows the video.
This video was recorded on March 9, 2017.
Chris Hill: Camping World Holdings. They're in the recreational vehicle business. Fourth quarter profits look good, but their overall sales were light, and I am assuming that is why shares of Camping World Holdings were down about 9%.
Bill Barker: Yeah. This is a company, and there are a number of markers that the RV sector is getting richly valued. One would be just looking at the performance of the larger companies in the space, Thor, which we talked about on Tuesday, and two of its suppliers, Drew [now LCI Industries] and Patrick, were all up about 75% to 80% last year. So, we know that in the market, there's a reversion of the mean, and that what goes up dramatically does not always keep going up dramatically. So, Camping World Holdings became public last October, at $22 a share, and was $35 a share going into today's report. So, it was up more than 50% in five months.
Hill: That's positively Snap-like. Except Snap did it in a day, before falling back to Earth.
Barker: Right. The RV industry has continued to actually put up some good numbers this quarter. But stock prices are deemed by the market, as of this week, to have gotten a little bit ahead of themselves. As you mentioned, Camping World's revenues were just a little bit light, about 1% against expectations, actually did put in very good numbers in terms of its bottom line. Earnings per share profitability much better than expectations, but the market, I suppose, is looking at revenues and saying, maybe things are slowing. I don't think the numbers indicate that things are slowing that much yet for RVs. But, given the expansion of stock prices, sure, take a little money off the table.
Hill: I don't watch the CNBC Primetime show, The Profit, and yet, as I understand it, the host of that show, Marcus Lemonis -- how do you say that?
Barker: I believe it's Lemonis. We haven't met, but yeah.
Hill: The host of that show is the CEO of Camping World. And, I'm assuming, that is a net positive for Camping World Holdings, that his hosting that show brings some attention to not just an industry that doesn't get a lot of coverage, but certainly a company that doesn't get a lot of coverage. I'm assuming that's a positive, as opposed to a Jack Dorsey situation where, if you're a shareholder of Twitter or a shareholder of Square, you're wondering why one person is the CEO of both companies.
Barker: Like yourself, I haven't seen the show, so we're making a lot of assumptions. But I have seen the commercials for it because they're on all the time on CNBC. That's how we are aware of his body of work, is that he is being promoted constantly by CNBC, and I'm sure that focus and that attention -- I don't know if he ever talks about Camping World on his show The Profit, or if it was introduced as that being one of the things that he does, but I think it probably has brought the attention of the company to people who otherwise wouldn't have, they figure, "I trust this guy, this guy seems smart and successful and CNBC promotes him all the time, and I'll invest alongside him." If so, between October and yesterday, that worked out really well for you. Today, the stock is down 9%. But, like I say, you're not going to get 50% increases in your stock over six months again and again without interruption.
Hill: It would be nice, though.
Barker: It would be great. And that's what we're all looking for. But, I think it was a good quarter. He talked about, on the conference call, and I'm referencing my colleague, Charly Travers, sending this to me, so I have to vouch for his work on it, but Lemonis is not seeing any slowdown in traffic in recent months in any geography. They're quite happy with the numbers they're seeing. So, that doesn't mean the price of the stock is immune from the minor miss on revenues that the company put up today. But, I think over the long-term it's a cyclical industry, and there are reasons to be concerned that you're investing at the top. There's more indication that we're not at the top yet. As I've said before, the macroeconomic indicators that you would look at for RVs include the price of gas, which goes into the cost of, not the cost of buying it, that's interest rate dependent, the cost of gas is the ownership cost. Also, jobs. All those numbers are still good. Gas is still at a good price. Interest rates are going up, but still very low by historical standards. And jobs numbers keep coming in very good.
Bill Barker has no position in any stocks mentioned. Chris Hill has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Twitter. The Motley Fool recommends Camping World Holdings and Drew Industries. The Motley Fool has a disclosure policy.
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