Spring has sprung, and summer's just around the corner, replete with dreams of family vacations. Also around the corner today: the Q1 2006 earnings news from Monaco Coach (NYSE:MNC), maker of towable and motorized RVs. Monaco reports tomorrow.
What analysts say:
- Buy, sell, or waffle? Eight analysts follow Monaco, with two rating the stock a buy and six more a hold.
- Revenues. Sales are expected to come in 7% stronger year over year, at $353.5 million.
- Earnings. But profits are predicted to drop by one-third, down to $0.12 per share.
What management says:
Back in February, CEO Kay Toolson used the dreaded word "challenging" to describe his company's business environment in the year 2005. This despite the windfall of late-2005 FEMA orders aimed at finding quick housing solutions to the people displaced by Hurricane Katrina.
To mitigate its problems, the company announced several initiatives aimed at boosting sales and cutting costs. These included the introduction of a new line of lower-priced diesel-powered motorhomes aimed at budget-minded and gas-price-obsessed consumers, and new equipment purchases that Monaco hopes will help it produce RVs more efficiently. CFO Marty Daley suggested that the company is now "uniquely positioned to rebound this year, even in a moderately declining market."
What management does:
One would hope Monaco can rebound -- it's certainly fallen far enough to date. Over the past 18 months, the rising costs of raw materials have crimped Monaco's gross margins significantly, with the rolling gross down 250 basis points over the period. Operating and net margin performance is similarly bad. Over the past six months, sales declined 11% year over year, but costs of goods sold declined only 9%, and selling, general, and administrative (SG&A) costs actually increased 3%.
|
Margins % |
10/04 |
1/05 |
4/05 |
7/05 |
10/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
12.6 |
12.2 |
11.8 |
11.3 |
10.4 |
10.1 |
|
Op. |
6.5 |
5.1 |
4.5 |
3.5 |
2.1 |
1.7 |
|
Net |
3.1 |
2.6 |
2.2 |
1.4 |
0.4 |
0.2 |
One Fool says:
With sales falling and operating costs rising, Monaco's chances of rebounding -- as the CFO predicts -- seem pretty slim, absent a significant plunge in raw-material costs that no one seems to be predicting. Failing that, the company needs to apply the brakes to its rising operating costs until the sales picture improves. So tomorrow, make sure to check out the SG&A line on the income statement to see whether any progress has been made there. Also take a minute to examine inventories. At last report, they were up 13%, despite the 11% decline in trailing-12-month sales -- not the kind of development designed to produce much free cash flow.
Competitors:
- Coachmen (NYSE:COA)
- Fleetwood (NYSE:FLE)
- National RV (NYSE:NVH)
- Parker-Hannifin (NYSE:PH)
- Winnebago (NYSE:WGO)
- Thor (NYSE:THO)
Fool contributor Rich Smith does not own shares of any company named above.
