RV Maker Winnebago Profits Top Estimates in the Face of Record Gasoline Prices

Leading RV maker Winnebago reported better than expected third quarter (May) earnings on Tuesday before the bell. Earlier in the month Thor Industries, $WGO’s top competitor also reported solid earnings and revenue in its report. While conditions are unfavorable with rising interest rates raising the cost to finance an expensive RV purchase and record-high gas prices increasing the cost to operate an RV. Supply chain shortages hampered production and delivery. However there does appear to be a new generation of consumers enjoying the easing of travel restrictions & lockdown inspired off-the-grid living.

Winnebago Classic

Winnebago Industries Inc NYSE: WGO: Reported Earnings Before Open Tuesday

$4.13 Beat $2.96 EPS Forecast and $1.46 Billion Beat $1.2 Billion Forecast in Revenue

Earnings

Winnebago Q3 earnings crushed analysts’ earnings expectations. Adjusted EPS surged 91% yr/yr to $4.13, topping estimates by over $1.00. Sales rose 51.8% to $1.46 bln, representing considerable upside. A jump from $71.29 million or $2.05 per share in the prior year quarter. The market in this space was expecting good things after THO delivered robust numbers in AprQ in early June. WGO is doing well at navigating supply chain headwinds.

The company said its revenues excluding the recently acquired Barletta business were $1.4 billion, an organic growth rate of 41.1% over the prior year period, driven by pricing increases and shipments related to the strong dealer order backlog.

Highlights

  • Motorhome sales grew 34% in Motorhomes (~35% of revs) thanks to strong demand for Newmar and Winnebago branded products. By comparison, THO posted a 36% climb in motorized units, respectively., thanks to strong demand for Newmar and Winnebago branded products.
  • Towable revenues soared 45% yr/yr (~55% of revs) primarily on solid consumer demand for Grand Design and Winnebago branded products, up from $543 million. By comparison, THO posted a 53% climb in towables.
  • WGO continues to take price to offset inflation, which contributed to gross margins expanding 100 bps yr/yr to 18.7% in Q3.
  • WGO’s backlog also continued to grow
  • WGO is continuing to capture additional RV retail market share, adding 70 bps yr/yr to 13.2%.

Outlook

Looking ahead, the company expects supply chain inconsistencies and inflationary pressures to continue into Q4 (Aug) and FY23.

One of the largest RV dealerships, Camping World Holdings (CWH), saw its inventory return to optimal levels in Q1, showing that supply chains have vastly improved from last year.

RVs are highly discretionary purchases, and consumers will put them off if monthly payments are too high. The demand for RVs continued its momentum by safe travel enthusiasts and millennials’ zeal for off-the-grid living. Comparing the two, THO reported wider earnings beat than WGO, which could provide headwinds to the stock after the market settled in today.

WGO’s growing backlog indicates that demand for camping is not yet letting up. WGO only sells its marine products internationally and most of it’s exposure is the US and Canada domestic markets for its primary products.

Much of the order backlog is due to deficient dealer inventory levels, it is a good indicator of consumer demand. THO expects elevated demand to continue even after dealers start to maintain inventory, which THO predicts should happen in CY23.

Another headwind is supply constraints and the shortage of various RV components in Europe and North America. A tight labor market, and high commodity and SG&A costs are also likely to have hurt its. Their are many variables for a reliable outlook with inflation jumping higher and the supply constraints that are well documented. Higher interest rates, higher gasoline and diesel prices as well increasing the costs of RVs are all headwinds.

The pandemic paved the way for more remote work.

Rv’s provide access to freedom, thousands of wineries, farms, breweries, etc. for self-contained RV’ers, found in its survey of 10,000 campers that 23% of them worked remotely in their RV in 2021.  Remote work is here to stay even if COVID-19 goes away. 

On the plus side remote work is seeing more individuals purchase RVs and work remotely as they travel the country. Living off the grid has become very popular after the pandemic forced many to find alternative ways of using vacation and leisure time. Looking at both THO and WGO they both had strong quarters despite constrained global supply chains showing RV demand remains robust in the new world order.

The pandemic ignited a desire to get off the grid which bodes well for the RV industry even after normalcy resumed. As people begin to camp in their RVs for the first time, many may embrace the lifestyle. This creates a larger pool of RV owners who could eventually become seekers of upgrades, helping to bolster the used RV market.

About Winnebago

Winnebago Industries, Inc. is a leading North American manufacturer of outdoor lifestyle products under the Winnebago, Grand Design, Chris-Craft, Newmar and Barletta brands, which are used primarily in leisure travel and outdoor recreation activities. The Company builds quality motorhomes, travel trailers, fifth-wheel products, pontoons, inboard/outboard and sterndrive powerboats and commercial community outreach vehicles. Winnebago Industries has multiple facilities in Iowa, Indiana, Minnesota and Florida. The Company’s common stock is listed on the New York Stock Exchange and traded under the symbol WGO.

Source: Winebago

From The TradersCommunity Research Desk