Investors haven't appeared confident in their views of the stock market so far in March. Stock indexes have seen swings in both directions, and many market participants seem to be waiting for guidance from economic data and government policymakers before taking a firmer stance on their views for the market. Tuesday morning, stock index futures were slightly higher, suggesting a roughly 0.1% gain for the Dow Jones Industrial Average (^DJI 0.40%) and similarly modest moves in other key benchmarks.
However, among companies that do business making vehicles, there were a couple of notable declining stocks. Rivian Automotive (RIVN 4.29%) didn't make investors happy with its timing on a key strategic move that sent the share price lower. However, a different stock that makes popular vehicles for consumers saw its stock lose even more ground. Below, you'll learn why Rivian was heading lower as well as discover the name of the other losing stock in the broader vehicle industry.
Image source: Rivian.
Rivian sells low
Shares of Rivian Automotive were down about 6% in premarket trading early Tuesday. The electric vehicle manufacturer didn't impress investors with its decision to raise capital at an inopportune time.
Rivian announced late Monday that it would offer $1.3 billion in six-year convertible senior debt. The EV company will make the offering directly to institutional investors, with the purchasers also having an option to buy an additional $200 million at their election over the ensuing 13 days. Pricing on the debt wasn't yet available, but Rivian structured the offering to allow investors to convert their debt into shares of Rivian stock under certain conditions.
Convertible debt has pros and cons for Rivian and its shareholders. It typically carries lower interest rates than conventional bonds, which should save Rivian vital capital up front with smaller debt maintenance expense. That should be especially true of Rivian's bonds because they should qualify as "green" bonds for investors who are interested in environmentally friendly companies. However, convertibles can also dilute shareholders if the stock rises, as debtholders will convert their bonds into new stock at lower prices if it makes sense for them to do so.
The big problem for Rivian is that issuing convertible debt with the stock price at an all-time low of $17 per share makes a lot less sense than it would have to do so as recently as November, when the stock traded at double that price. That Rivian has to resort to raising capital at such a bad time speaks to its failure to live up to high expectations thus far.
Thor Industries' RV business falters
A manufacturer of much larger vehicles fared even more poorly early Tuesday, as Thor Industries (THO -2.43%) saw its stock fall 8%. The recreational vehicle manufacturer's results for the fiscal second quarter that ended Jan. 31 showed just how much the industry is pulling back from exceptionally strong results in recent years.
Thor's latest numbers weren't pretty. Net sales fell almost 40% year over year to $2.35 billion. Gross margin was down more than 5 percentage points to 12.15, and net income plunged almost 90% to just $27 million. That produced earnings of $0.50 per share.
Thor suffered the worst performance in towable RVs, where unit shipments dropped 65% as consumer demand softened from extremely strong levels a year ago. Higher manufacturing overhead costs resulted in the segment seeing a net loss. Motorized RV sales in North America were also significantly weaker, with a 26% fall in unit shipments. Thor's European market did fairly well by comparison, but even there, supply chain constraints led to a 15% drop in shipments.
In response, Thor cut its full-year fiscal 2023 guidance, with sales now expected to be between $10.5 billion and $11.5 billion and earnings coming in between $5.50 and $6.50 per share. Those figures are down about $1 billion on the revenue side and about $2 per share for earnings, and show that Thor expects tough economic conditions to weigh on results for the rest of the year.
