Investors are optimistic heading into Winnebago's (WGO 2.04%) fiscal third-quarter earnings release, scheduled for June 19 before the market opens. Sure, the recreational vehicle industry has been seeing year-over-year declines in each month so far this year,  but Winnebago has so far managed to avoid any sharp sales or profitability declines. Instead, the RV giant entered the spring selling season with far better order and pricing trends than rival Thor Industries (THOR).

On Wednesday, investors will find out whether that performance gap continued into the second half of Winnebago's fiscal year. Shareholders will also receive key updates about the RV giant's outlook for the rest of the year and into 2020. Let's take a closer look.

A person wrapped in a blanket and sitting on a bed looks out of an RV window

Image source: Getty Images.

Where supply meets demand

Sales trends always capture investor attention, but that metric will be even more closely watched this time. The RV industry is experiencing a growth hangover right now, and so shareholders are trying to determine the timing of an eventual rebound. Sales had been rising, but a reversal so far in 2019 has caused major headaches for dealerships and manufacturers like Winnebago.

Thor Industries cited that slump recently when it announced that its sales volumes sank 23% in the fiscal third quarter. Executives said they've even made the tough decision to curtail production at some of the company's plants to match supply with reduced RV demand.

The good news is that the 23% sales drop represents an improvement over the prior quarter's 35% decline. And Winnebago has been more successful at protecting its volumes lately, which helps explain why analysts who follow the stock are predicting that revenue will inch higher by 2% this quarter to about $574 million.

Meanwhile, the backlog metric, which represents orders likely to ship over the next six months, will demonstrate whether CEO Michael Happe was right back in March when he predicted that the RV market would stabilize over the next few months. Backlog fell 39% in the motor home division last quarter and dipped by a more modest 7% for the company's towables line. Given management's positive comments at the start of the spring selling season, investors are hoping for improved results on this score.  

Costs and outlook

Happe and his team have also predicted that bottom-line profitability will improve in 2019 despite major headwinds like rising input costs and sluggish demand. Winnebago is hoping to counteract those challenges through more efficient motor home production and a continued shift in sales toward high-margin towable products. We'll find out whether the company made positive strides here if it shows stable or improving operating margin. That metric fell to 6.7% of sales last quarter from 7.5% a year earlier.

Finally, while Winnebago doesn't issue short-term sales forecasts, investors can expect to hear management's latest reading on the health of the RV industry. Three months ago, executives said the recent decline in RV shipments was mainly driven by temporary factors, especially elevated dealership inventory following years of double-digit sales growth. They said they were encouraged by strong retail traffic and sales in the first few weeks of the quarter, too, which implied that Q2's 8% revenue decline might quickly reverse itself.

Investors will find out soon whether that optimistic scenario played out over the last few months. If it did, then Winnebago might manage modestly higher sales and profit margins in fiscal 2019 despite the weak industry conditions.