Big oil businesses such as ExxonMobil
Revenues through nine months of the fiscal year decreased 12.6% from the same period last year. The formidable market conditions appear to have had an even more pronounced effect in the third quarter, with revenues declining 17% compared with the same period a year ago. This decrease is comparable to competitor Winnebago's
On top of a double-digit decline in its top line, Monaco Coach's gross profit margins took a hit of 3.8 percentage points, lowering it to the current 8.3%. As a result of weakening sales and margins, the company posted a loss of $0.20 per diluted share, compared with a $0.25-per-share gain a year ago.
On a positive note, Monaco Coach is taking steps to streamline its operations to reduce costs. In April, it announced it would close a manufacturing facility in Bend, Ore., consolidating it into its Coburg, Ore., operation. In July, the company announced that its Royal Coach subsidiary in Elkhart, Ind., would cease operations.
These reductions to its workforce will help lower costs as it continues to deal with challenging market conditions that are expected to continue into 2006. With zero cash on Monaco Coach's latest balance sheet, reducing costs is a must.
Monaco Coach's stock is nearing lows not seen in more than two years. But multiyear lows are not reason enough to buy a stock. The company's weak cash flow situation brings added risk to a business operating in a highly competitive market that is further strained by rising interest rates and fuel costs. Given this risk, prospective investors might want to wait until Monaco Coach finds some gas to run on before hopping in.
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Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.