Recreational vehicles have been red-hot lately, and Thor Industries (THO 0.96%) has made a name for itself among stock market investors with huge share-price returns. Until recently, many analysts thought the aging baby boom generation would eventually lead to the end of demand for RVs, but millennials have turned out in large numbers to rejuvenate the industry and drive a new wave of popularity.
Coming into Wednesday's fiscal fourth-quarter financial report, Thor investors were looking to see a continuation of the favorable growth trends that the company has enjoyed for quite a while. Thor was able to deliver on its full promise, posting record results and foreseeing a solid future. Let's take a closer look at Thor Industries and how it has done lately.
Image source: Thor Industries.
Thor hammers out strong financial performance
Thor Industries' fiscal fourth-quarter results put the finishing touches on an amazing fiscal year for the RV specialist. Revenue during the quarter jumped by almost exactly half to $1.93 billion, easily crushing the $1.84 billion in sales that most investors were expecting to see. Similarly, net income climbed 44% to $119.5 million, and that resulted in earnings of $2.26 per share, well above the consensus forecast among those following the stock for just $1.95 per share.
Taking a closer look at the report, Thor finally reached the point at which the Jayco acquisition will be more than a year old going forward. That will bring growth rates down, but it shouldn't eliminate them entirely. Jayco contributed about $400 million more in revenue during fiscal 2017's fourth quarter than it did during the year-ago period, but that still left more than $240 million in organic sales growth from Thor's pre-existing businesses.
Gains across Thor's business were well-balanced. The towable RV unit saw dollar-value sales climb 47%, with Jayco contributing about a quarter of total revenue and organic sales gains of almost 18%. Unit volumes were up by more than half from year-ago levels. Pretax income for the segment jumped 40%, overcoming declines in gross margins related to the mix of Jayco sales. Thor noted especially strong demand for more affordably priced travel trailers, reflecting the budget-conscious decision-making that millennial customers are making with their purchases. Backlog figures for the segment almost doubled to $1.42 billion.
For the motorized RV segment, figures were similarly strong. Segment sales in dollar terms jumped by two-thirds, with high demand for gas-powered Class A and Class C motorhomes that appeal to thrifty consumers. Unit sales rose 57%. Organic sales gains of 24% were impressive, and pre-tax income climbed by about three-eighths. Backlog figures also doubled to $916 million, showing the staying power that Thor is enjoying right now.
CEO Bob Martin was quite happy with the performance. "Thor completed another year of exceptional growth," Martin said, "supported by strong demand from dealers and consumers for our products, notably our expanded lines of more affordably priced towable and motorized RVs." The CEO noted that the product mix is resulting in getting "more types of customers, including baby boomers and millennials, to take part in the RV lifestyle."
Can Thor make lightning strike twice?
Thor doesn't see the favorable trends in the industry ending soon. In Martin's words, "Industry fundamentals remain strong, and we are looking forward to another year of growth in fiscal 2018." Results from the company's annual open house showed high levels of excitement among Thor's dealer network for new and redesigned RV products, and Thor anticipates continuing to expand production capacity to meet demand.
In particular, Thor pointed to predictions that industrywide shipments of various types of RVs should rise 10% to 12% in calendar 2017 compared with 2016. With efforts to improve profit margin figures at Jayco and expected increases in demand for entry-level RVs, Thor believes that it can surpass its record performance over the past year with an even better fiscal 2018. The company also said that it intends to keep sharing its success with shareholders through increased dividends, pointing to its seven-year streak of annual dividend hikes and stating its intent to extend that streak going forward.
Thor investors were happy with the news, and the stock rose 4% in after-hours trading following the announcement. The RV market shows no signs of hitting the brakes, and Thor is capturing the opportunity and keeping an iron grip on its leadership position in the industry.
