For years, huge growth in the recreational vehicle industry helped support demand for the accessories and components that go into those vehicles. LCI Industries (LCII 0.61%) was a big beneficiary of the RV boom, and the company turned good times into impressive share-price gains. However, all good things come to an end, and in a business that's notoriously cyclical, some saw it as just a matter of time before interest in recreational vehicles started to hit its limit.

Coming into Thursday's fourth-quarter financial report, LCI investors expected that earnings might take a modest hit, but they still believed that sales would move higher. Instead, LCI's top line gave up a bit of ground, and that has some investors more nervous than ever about 2019's prospects.

The LCI logo: a black circle with stylized letters LCI inside.

Image source: LCI Industries.

LCI Industries faces a roadblock

LCI Industries' fourth-quarter results weren't as good as many had hoped. Revenue slumped 2% for the quarter to $536.6 million, which was worse than the 4% sales growth that most of those following the stock had expected to see. Adjusted net income of $20.8 million was down nearly a third from year-earlier levels, and that produced adjusted earnings of $0.82 per share, missing the consensus forecast among investors for $1.11 per share in profit.

What's even worse is that the company got a huge boost from its acquisitions over the past year. Sales from those purchases amounted to $59.2 million, or roughly 11% of the company's overall revenue. Without those acquisitions, revenue would have plunged by double-digit percentages from year-earlier levels.

Looking at the various segments in LCI's business, it's clear that things would've been far worse had it not been for the company's moves to diversify its business exposure. In the key RV original equipment manufacturing segment, sales of travel trailers and fifth-wheel RVs were down 17% from year-earlier levels, and motor home-related revenue was off almost 6%. It took a massive 45% gain in OEM sales from adjacent industries like marine products to cushion the blow, as well as a nice boost of almost 25% in aftermarket product sales to prevent a full-scale sales collapse. From a bottom-line standpoint, operating profit for the OEM area was off 40% from year-ago levels, while aftermarket profits were up double-digit percentages.

LCI did see good market-share numbers. Content in each travel trailer and fifth-wheel RV that it provides components for rose in value by $187 to $3,450 per vehicle, with motor home RV content gains of $272 to $2,491. New-product introductions played a role in helping LCI get more from its relationships with manufacturers.

CEO Jason Lippert celebrated a good 2018 overall but admitted the changing conditions in the industry. "While we are confident in our ability to further execute on our strategy going forward," Lippert said, "we are cognizant of the challenges that our business and industry have faced over the last 12 months." The CEO pointed to actions taken to help deal with lower volume, including price increases to offset tariff costs and reduced spending on capital investments.

Check out the latest LCI earnings call transcript.

Can LCI recover?

LCI is optimistic about the future. As Lippert said, "We are confident we will continue to deliver solid financial and operating performance, as our entire team remains laser-focused on growth, penetrating new markets, and driving more value to our customers through unmatched innovation."

Yet early results from 2019 didn't add much confidence. January sales of $187 million were down 9% from last year's January, and the company pointed to reduced production rates by original equipment manufacturers, as well as poor weather that held back RV shipments.

Investors weren't pleased with the news, but even though LCI shares initially fell more than 10%, the stock clawed its way back to a loss of 4% at midday following the morning announcement. Despite nervousness about recent results, LCI has made a lot of progress over the long run, and investors seem confident that the company will be able to weather the current storm and generate good long-term results.