Winnebago (WGO) Sets Out For Greener Pastures Following Its Impressive Headline Numbers In MayQ
2:20 pm Wednesday, June 22nd, 2022
Winnebago (WGO) investors are not looking to break camp just yet following the RV manufacturer’s $1.00+ earnings beat and accelerating revenue growth in Q3 (May). Shares are still down nearly 40% on the year as macroeconomic conditions remain unfavorable, including rising interest rates propping up the cost to finance an expensive RV purchase and record-high gas prices increasing the cost to operate an RV.
Although the Federal Reserve plans to continue hiking rates this year, there has been some good news on the inflation side, such as oil prices dropping around 15% from June highs. With RVs being a highly discretionary purchase, if inflationary forces can begin to ease, consumers currently priced out of the market may return. An easing of inflation would also coincide with an ongoing normalization of supply chains.
Furthermore, as we saw with competing RV manufacturer Thor Industries (THO) earlier this month, demand is still relatively strong. This was also demonstrated with WGO’s solid MayQ results.
Adjusted EPS surged 91% yr/yr to $4.13, topping estimates by over $1.00. At the same time, sales climbed 51.8% to $1.46 bln, representing considerable upside. Even though headline figures were exceptional, the market may have mostly expected them after THO delivered similar numbers in AprQ in early June.
Perhaps a notable standout from Q3 was WGO continuing to capture additional RV retail market share, adding 70 bps yr/yr to 13.2%.
Looking ahead, the company expects supply chain inconsistencies and inflationary pressures to continue into Q4 (Aug) and FY23. Notably, 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. Also, 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 results were solid but mostly mirrored THO’s AprQ numbers from earlier this month, fueling only modest gains today. With macroeconomic conditions still mostly unfavorable, the stock may face difficulty recovering in the short run. However, positive developments are on the horizon, like improving supply chains and falling oil prices, which may be the kindling needed to ignite a turnaround in WGO’s share price.
