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: Shares of Winnebago Industries (NYSE:WGO), a leading manufacturer of recreational vehicles, slumped on Thursday after the company reported disappointing earnings. By 12:30 Thursday afternoon, the stock was down nearly 15%.
So what: Winnebago reported revenue of $234.5 million for its fiscal second quarter, a year-over-year increase of 2.5%. This was well short of the average analyst estimate of $253.3 million. Sales growth was driven by a 2.4% jump in motor-home unit shipments and an 11.8% increase in towables revenue.
EPS of $0.30 missed analyst estimates by $0.08, representing a year-over-year decline of 14.3%. Lower profits were the result of labor-related issues as well as costs associated with strategic initiatives.
Despite the revenue and earnings misses, there was some good news for Winnebago. Year-over-year motorized unit bookings grew 59% during the quarter, allowing the company to maintain a healthy backlog. Motor-home retail registrations also grew by 18%, from which management concludes that consumer demand trends for its products remain favorable.
Now what: Winnebago operates in a cyclical industry that is extremely sensitive to the economy. During the financial crisis, revenue completely collapsed, plunging the company into losses. However, Winnebago has a strong position in the motor-home industry, with a market share of around 22% in the United States, and its pristine balance sheet, with no debt to speak of, gives the company breathing room in the event of decreased demand.
Winnebago's quarter was better than it seems, and analysts may have simply been overly optimistic. Demand is rising, albeit slowly, and bookings growth was strong. With the stock now trading at around 12 times earnings, Winnebago deserves a deeper look from investors.