Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Drew Industries
So what: Acquisitions and improving demand in the RV industry, which accounted for 79% of 2010 sales, more than offset shrinking sales in the manufactured housing segment to drive fourth-quarter sales growth of 1.5% year over year. Lower operating expenses and a lower tax rate more than offset weaker gross margins and were the primary drivers of 7.9% net income growth year over year.
Now what: Recent consumer strength could help RV sales in the seasonally strong second and third quarters, though current Mideast tensions could cause gas prices to rise and negatively affect demand for gas-guzzling RVs. Ongoing weakness in housing and credit suggest the manufactured housing segment will remain under pressure this year. With management stating the tax rate will jump up in 2011, volatility in raw material costs has become the norm, and it expects to "make progress in 2011 toward realizing the long-term potential of our business," the risks seem to outweigh the potential rewards at the current valuation.
Interested in more info on DW? Add it to your watchlist here by clicking here.
