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Winnebago Keeps on Rolling

By Demitri Kalogeropoulos – Oct 16, 2014 at 10:13AM

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The motor home sales recovery is still going, and Winnebago is leading the way.

The motor home sales rebound is chugging along nicely, and Winnebago Industries (WGO -0.70%) keeps winning a growing share of that market. The RV seller today announced results for its fiscal fourth quarter that beat Wall Street's estimates on both the top and bottom lines. 

Source: Winnebago.

Quarterly sales were $246 million, or 15% above the year-ago period. Earnings grew much faster, spiking higher by 26% to reach $0.48 a share. Wall Street analysts had been looking for less-impressive sales and profit growth of 14% and 23%, respectively. Shares were slightly higher in early trading.

Looking under the hood
Investors should be pleased that motor home demand held up through the quarter: Winnebago's deliveries improved by 25% in Q4 and 28% for the full fiscal year, which more than offset a slight drop in average selling prices.

However, that 28% delivery gain represents quite a slowdown from the last fiscal year's 50% bounce. And there were a few other signals that pointed to a potentially bumpy road for sales growth ahead. 

For one, Winnebago's pace of new motor home retail registrations slowed to 17% in Q4, as compared to 28% over the past 12 months. And the company's order backlog, which is an indication of demand over the next six months, fell by half from its prior level of $345 million. CEO Randy Potts explained back in June that management was aiming for a steady backlog of around $200 million, which they view as more sustainable for both Winnebago and for its dealers. Still, a backlog drop of that magnitude is worth watching, as it could signal skittishness on the part of RV shoppers that isn't simply due to the coming winter weather.

Sturdy financial gains
Meanwhile, Winnebago's lean operation continued to bear fiscal fruit. Operating margin grew to 7.4% of sales from last year's 7.2%. Net income also improved to 5.3% of sales from 5% in the prior-year period. Quarterly cash flow was a positive $13 million, and the company's balance sheet looks strong, with zero debt and almost $60 million in cash on the books.

That improving financial position was likely one reason that management decided to reinstate Winnebago's dividend today. The new payout will start at a quarterly pace of $0.09 per share, which works out to an annual yield of around 1.6%. Long-term shareholders will remember that the dividend has been halted since 2008 to conserve capital through the recession.

The fact that the payout is back shows just how far Winnebago has come since those lean days. And here's another stark example of that recovery: Sales in the fiscal year that just closed were more than four times above the annual haul from 2009.

Demitrios Kalogeropoulos has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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