Why Is Thor Industries (THO) Down 7.4% Since Last Earnings Report?
A month has gone by since the last earnings report for Thor Industries (THO). Shares have lost about 7.4% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Thor Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Thor Puts Up A Stellar Q4 Show
Thor reported adjusted earnings of $2.14 per share in the fourth quaretr fiscal 2020, which surpassed the consensus estimate of $1.38 by 55.1%. Also, the metric rose 28.1% year over year backed by strong revenues and gross margin.
Net sales of $2.32 billion topped the consensus mark of $2.31 billion by 0.7%. On a year-over-year basis, the top line increased 0.5%, mainly backed by solid European RV segment.
Gross margin came in at 14.9%, which improved 50 basis points (bps) from the year-ago level. This was mainly driven by reduced warranty costs and overhead savings from cost-reduction measures in response to the COVID-19 outbreak, partially offset by an increase in material costs, primarily due to product mix.
North American Towable RVs’ sales of $1.18 billion grew 1.7% from the prior-year period. The segment’s gross margin rose 60 bps to 16.6% from a year ago, driven by lower material and warranty costs as a percentage of North American towable net sales.
At fiscal fourth quarter-end, backlog in the segment totaled $2.76 billion, up almost 300% from $693.2 million reported a year ago.
Sales in the North American Motorized RVs fell 5.4% year over year to $366.5 million due to lower unit sales and a shift in product mix. Nonetheless, gross margin improved a notable 250 bps on a year-over-year basis to 12.1% owing to the above-mentioned tailwinds.
Backlog in the segment increased 216.4% to $1.45 billion from $458.8 million recorded a year earlier.
The European RVs segment’s sales were $739.9 million for the quarter, up 2.8% year over year. The upside was driven by a change in product mix and selective selling price increases. Gross margin for the segment totaled 13.2%, down 20 bps from a year ago.
The segment’s backlog was $1.53 billion as of Jul 31, 2020, reflecting an increase of 79% from the year-ago period.
As of Jul 31, 2020, Thor had cash and cash equivalents of $541.4 million, up from $451.3 million on Jul 31, 2019. The company had a long-term debt of $1.65 billion at fiscal fourth quarter-end compared with $1.89 billion at fiscal 2019-end.
Fiscal 2021 Guidance
Thor is optimistic about fiscal 2021 as it is witnessing considerable interest in the RV lifestyle from first-time buyers and strength in the upgrade buyer. However, it is experiencing supply chain challenges and constraints as suppliers are ramping up to meet the unexpectedly high level of demand from manufacturers.
Bob Martin, president and CEO of Thor said “Looking ahead, we expect a year of continued growth in fiscal 2021, and we concur with RVIA's recent RoadSigns most likely forecast of an approximate 19.5% increase in calendar 2021 shipments over their most likely estimate for calendar 2020 shipments.”
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 25.2% due to these changes.
Currently, Thor Industries has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Thor Industries has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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