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Thor Industries Operating In High Gear; Sales, Net Up

Posted
1/23/2013 4:47:00 PM
By: Investor's Business Daily
Referenced Stocks:IEX;THO;WGO

The Florida RV Super Show drew heavy traffic last week as more than 50,000 consumers gathered at the Florida State Fairgrounds in Tampa to scope out the new 2013 models of recreational vehicles.

The show, which ran from Jan. 16 to Jan. 20, is a venue for dealers to sell the products on display from the manufacturers they represent.

Thor Industries ( THO ), the largest maker of RVs in North America, had a strong presence at the show, where all its subsidiaries and brands were represented.

Thor President Bob Martin gave an upbeat early read on the show: "Attendance at the Tampa show is up from last year, early indications suggest that retail sales are strong, and our dealers remain upbeat," Martin told IBD Jan. 17. "These are all very positive signs for growth for Thor and our industry this year."

Riding The Comeback Trail

The warm reception at the show is in keeping with the overall climate for the RV industry, which has seen demand heat up after cooling off in a big way during the recession.

The industry started to move on the comeback trail in 2010, and has been gaining speed ever since. RV wholesale shipments are estimated to have grown to 277,000 to 285,000 units in 2012, says Kevin Broom, a spokesman for the Recreation Vehicle Industry Association. That would be up from 252,300 units in 2011. Forecasters call for a 4% to 5% rise in RV wholesale unit shipments in 2013, says Broom.

Thor, which makes the whole gamut of RVs under brand names such as Airstream, has been cashing in on the rebound. Sales have climbed by double digits in all but one of the past 13 quarters. And profits have risen by double digits for two straight quarters.

First-quarter fiscal 2013 sales popped 30% to $875.6 million, the highest level of sales growth in over two years. Profits climbed 41% to 58 cents a share.

Thor, which also is a major builder of commercial buses and ambulances, saw total RV sales rise 36% to $761.14 million from a year earlier. Its biggest piece of business is in towable RVs, which enjoyed a 28% pop in first-quarter sales to $639.2 million. Motorized RV sales surged 95% to $122.2 million.

First-quarter results were supported by dealer optimism and strong orders at its open house for dealers in Elkhart, Ind., in September, said Chief Executive Peter Orthwein in a statement.

Martin says much of the overall improvement in the RV market is linked to greater availability of credit for dealers on the wholesale side and consumers on the retail side.

The wholesale credit market has come back strong, he says, and dealers and lenders feel "very positive" about current inventory levels. Retail lending has also improved, he adds, but standards are stricter than the pre-recession days. Lenders now require more money down, and they've tightened the credit standards for RV financing.

Consumers are also more in an RV buying mood than they had been. Consumer confidence is up, the economy is improving, and the jobs market has stabilized, says Broom. People are more willing to invest in buying an RV, he adds.

Rival RV makerWinnebago Industries ( WGO ) is also enjoying a nice run with solid sales and profit gains in recent quarters.

"Such strong results from Thor and Winnebago reflect increased optimism on the part of dealers, which aggressively have ordered products," said Wedbush Securities analyst Rommel Dionisio. "They have a renewed optimism in the rebound in market."

He expects the "more of the same" scenario this year, with continued renewed optimism and further market recovery.

Consumers have plenty of RVs to choose from. Manufacturers, says Broom, are giving consumers an appealing mix of weight, size and amenities.

That includes Thor, which, through its subsidiaries, makes every type of RV from entry-level travel trailers to high-end Class A diesel motor homes. It's No. 1 in towable RVs with brands such as the iconic Airstream name, Dutchmen and Crossroads.

Thor Motor Coach makes gasoline and diesel Class A and Class C motor homes under trade names such as Four Winds and Hurricane.

Earnings Bounce

Followers expect Thor to continue to fare handsomely with its current lineup. Analysts polled by Thomson Reuters see second-quarter earnings rising 48% to 37 cents a share. They expect full-year profits to rise 27% to $2.87 a share. They forecast a 20% gain in profits in 2014.

Broom says the RV industry is regaining ground. "But we don't consider ourselves recovered," he said.

In 2006, RV wholesale shipments hit 390,500 units. That would compare with the 277,000 to 285,000 forecast to be shipped in 2012.

Separately, Thor has named Dominic Romeo as its new chief financial officer effective Feb. 4. Romeo's most recent post was chief financial officer of IDEX Corp ( IEX ).