Winnebago's (WGO 0.23%) latest earnings report was packed with good news for investors. The recreational vehicle giant revealed strong sales growth, record profitability, and a huge order backlog through the quarter that ended in late November. These trends all imply a big fiscal 2022 ahead for the business.
Management added context on these operating metrics in a shareholder presentation, and below we'll take a closer look at three of the biggest takeaways from that report.
Image source: Getty Images.
1. Market share
Winnebago's business has come a long way in the past five years. Its share of the RV market in 2016 was just over 3%, but thanks to a few big acquisitions and investments in the motor home and towables segments, it has added roughly 10 percentage points to that total. That success helps explain why annual sales are over $4 billion today compared to $1 billion in fiscal 2016.
Image source: Winnebago investor presentation.
Besides a better industry position, that shift has produced a much more stable business that's spread out across many outdoor living segments. Rather than just motor homes, Winnebago has a huge presence in boats and towable RVs. Its brands, including Grand Design, Winnebago, Chris-Craft, and Barletta, all focus on the higher-end, premium segment of the market.
2. The finances
There's no shortage of positive developments on the financial side of the business, either. Annual free cash flow is running at over $200 million compared to less than $100 million in fiscal 2017. Gross profit margin just hit a record of 20% of sales, too, thanks to rising prices and robust demand across the portfolio.
Image source: Winnebago investor presentation.
Sure, some of that profitability spike is just due to inflation. But it's still impressive that Winnebago can boost prices faster than its costs are rising. Those record margins are occurring despite major supply chain challenges, too, suggesting more room for higher earnings ahead if demand doesn't retreat.
3. The outlook
The RV industry is predicted to grow in 2022 even compared to last year's sales spike. That bodes well for the industry's leader, especially as it continues to increase market share.
The wider outlook is bright, too. There was a 16% boost in camping demand in the U.S. this past year, which is a much faster expansion than usual. The pandemic has put a new focus on outdoor recreation, one that doesn't appear to be waning.
Image source: Winnebago investor presentation.
Management is especially excited about the millions of people who say they intend to buy an RV over the next five years. That metric includes the more than two-thirds of current RV owners who want to upgrade.
Winnebago's current backlog is sitting at nearly $5 billion, which is more than its trailing-12-month sales footprint. Sure, those orders can be canceled by dealers at any time without a penalty, so they aren't the same as actual sales.
But given the low inventory levels at dealerships and the high demand for RVs, Winnebago has a good shot at keeping its factories working at capacity through 2022 even as it raises gross profit margin above 20% of sales. Those wins should support continued strong returns for the RV giant's shareholders.
