Image source: Winnebago.

Winnebago Industries (NYSE:WGO) has a ubiquitous presence on American highways and byways, with the company's recreational vehicles and motor homes being a popular choice among road-trip enthusiasts in the U.S. and around the world. Yet coming into Thursday morning's fiscal-third-quarter financial report, Winnebago investors were nervous about whether the company would recover from its disappointing performance in recent quarters. Fortunately for shareholders, Winnebago's results pointed to a recovery for the RV company, and the stock responded quite favorably. Let's look more closely at how Winnebago did last quarter and what's ahead for the motor-home maker.

Winnebago enjoys a smooth ride
Winnebago's fiscal-third-quarter results delivered everything the company's second-quarter results failed to give investors. Revenue growth of 7.6% was more than triple the previous quarter's pace, with sales hitting $266.5 million and outpacing the expectation for just 5.5% growth. Winnebago also did a good job of capturing some of that increased sales for its bottom line, with net income inching upward to $11.5 million and pushing year-over-year earnings up by a penny to $0.43 per share, defying expectations for a penny-per-share drop.

While Winnebago produces towable products such as travel trailers and fifth wheels, motor homes are the RV company's most important source of sales. After disappointing results in the company's last report, an 11% jump in the number of motor homes shipped during the latest quarter contributed to a 7.4% revenue gain. The company attributed the growth in motor-home volume in part to its Apollo rental program, as favorable changes to that business meant Winnebago didn't have any repurchase obligations for those units. Lower average selling prices held back revenue gains from motor-home sales, but Winnebago saw better pricing for its towables, leading to a nearly 16% rise in revenue from that segment.

One concern, though, comes from backlog figures. Overall, motor-home backlog fell 3%, with an even bigger 28% drop in backlogs for the largest Class A motor homes reflecting the ongoing shift in demand away from those products toward smaller motor homes. The good news, though, is that backlogs in the key Class C segment climbed 22%. Still, with a 10% drop in projected backlog revenue to about $197 million, Winnebago must show it can produce positive momentum going forward.

CEO Randy Potts was pleased that Winnebago overcame some headwinds to produce the positive results. "Third quarter results came in quite strong despite costs related to our two strategic initiatives, an impairment charge, and the absence of the life insurance gain from last year," Potts said in the company's earnings press release. The CEO also pointed to Winnebago's enterprise resource planning system work and its project to be smarter about sourcing as positive signs.

What Winnebago sees down the road
Winnebago believes that signs look favorable for the company. "With our lineup of industry leading recreation vehicles," Potts said, "coupled with favorable consumer demand and [the Recreational Vehicle Industry Association's] current projection for further industry growth through calendar 2016, we believe we are well positioned to generate improved financial results."

Indeed, the potential increase in the size of the recreational vehicle market is huge. The RVIA expects manufacturers will ship 380,000 RVs this year, which would be the highest total since 2007, before the recession and financial crisis brought down financial prospects for the industry's core customer base. In particular, Winnebago and other manufacturers have done a good job of responding to their customers' changing budgetary needs, with the RVIA characterizing these moves as "rightsizing RVs to offer the mix of amenities and price that consumers want."

Winnebago investors were thrilled with the company's latest results, sending the stock higher by more than 6% in the first hour and a half following the announcement. If low fuel prices persist, they could easily power a big push toward RV ownership. With other favorable trends helping it, Winnebago has a solid chance to cash in on any resulting sales surge in the industry and thereby keep its stock moving on down the road.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.