It was just a few months ago that Winnebago Industries (WGO -2.06%) surprised investors by announcing a sharp jump in demand for its recreational vehicle products. Sales spiked in the fiscal first quarter of 2021, and other metrics, including profit margins and order backlog, implied further gains ahead.
That positive investing thesis will be put to the test when Winnebago announces second-quarter results in just a few days. And given the stock's rally in recent weeks, expectations are running high heading into that announcement. Let's take a closer look at the metrics to watch from Winnebago on Wednesday, March 24.
Image source: Getty Images.
Winning market share
Interest in the RV niche has soared as the pandemic crosses into its second year. Winnebago's order backlog hit a record in late October, and the company capitalized on that surge by delivering far more motorhomes and towable units last quarter. Sales in the fiscal first quarter jumped 22% after adjusting for new brand acquisitions.
The outlook is just as strong for the current quarter. CEO Michael Happe and his team said back in December that dealerships were having trouble keeping inventory stocked as people snapped up RVs in search of safer recreational options during the pandemic.
As a result, Winnebago should show strong sales growth in its towable and motorhome divisions, which each posted triple-digit order volume increases in recent months. Look for management to also update investors on its positive market share trends on Wednesday.
Charging full price
Winnebago's margins have been rising thanks to several positive factors, including a shift in demand toward towable units and lower manufacturing costs. But the biggest lift has come from favorable industry dynamics. With demand outstripping supply, dealers haven't had to offer many promotions to get RVs moving off of their lots. And that's been great for Winnebago's profit margins.
WGO Gross Profit Margin data by YCharts
Wall Street is expecting a similar bounce this quarter, which will power an earnings rebound to roughly $1.29 per share compared to a loss in the year-ago period. That quarter was impacted by the start of pandemic-related manufacturing and retailing shutdowns.
Looking out
Winnebago competes in the consumer discretionary category, which is highly sensitive to changes in consumer income. The new COVID-19 relief bill, in addition to recent demand trends, should give management plenty of support for any bullish outlook they issue for the rest of fiscal 2021.
Investors know that the cyclical RV industry will shrink again at some point. But, for now, it appears to be on an upsurge that could last through at least the rest of Winnebago's fiscal year. The company's widening portfolio, expanding market share, and rising margins mean that Winnebago is getting more than its fair share of that sales and profit spike.
That's why it's no surprise that the stock is rallying heading into what could be another blockbuster earnings report by the RV industry leader in a few days.
