Winnebago Industries Q1 Earnings: Still Growing

Small cap motor home or RV stock Winnebago Industries (NYSE: WGO) reported fiscal Q1 2018 earnings before the market opened on Wednesday with results easily topping forecastswith the Companypredicting a ninth straight year of growth for the industry. Revenues increased 83.5% to $450.0 million as revenues for the Motorized segmentfell 2.4% to$190.4 million while revenues for the Towable segment were $259.7 million for the quarter, up $209.5 million over the prior year, driven by the addition of $195.4 million in revenue from the Grand Design RV acquisition and continued strong organic growth in Winnebago-branded Towable products (which increased more than 50% compared to last year).Backlog remains strong while retail sales continue to outpace the industry for both brands.Net incomeincreased 53% to$17.958 million versus $11.738 million. The President/CEO commented:

As we begin Fiscal 2018, were pleased with our consolidated results, including continued robust sales growth and margin improvement, as well as further progress toward becoming a larger, more profitable full-line RV provider centered around our two leading brands, Winnebago and Grand Design RV. Our results reflect a transformed portfolio and focused dual-brand strategy that positions us to drive increasing market share and profitability, balancing our Motorized business with a fast-growing Towable segment. Our Grand Design RV business recently celebrated its one-year anniversary as part of Winnebago Industries and continues to perform well, as does our Winnebago-branded Towable division. On the Motorized side, profitability continues to be impacted by new product line start-up costs, ongoing expenses related to the ramp up of our West Coast production facility and an increase in direct material costs. All of our businesses had a successful fall season, with strong new product showings at the two largest industry events of the year, driving an increased order backlog. As always, I want to thank all of our Winnebago Industries employees for their hard work during the quarter and for their ongoing dedication to providing high-quality products and service to our customers.

Going forward, our focus remains on improving the operations of our business to drive long-term, sustainable profitability. The Motorized business continues to strive to build a profitable foundation with improved products, stronger dealer relationships and a more efficient operations base. Our Towable businesses remain well-positioned to drive future market share and profitability growth given our strong backlog and improving dealer lot space via new product launches. We remain optimistic about the strength of the RV marketplace as a whole, with overall U.S. shipments expected to exceed 500,000 units in 2017, and a ninth consecutive year of growth projected in 2018. Winnebago Industries launched several strong new products this fall, all of which have received very positive industry response. On the Motorized side, we introduced the Intent, our value-priced Class A Gas RV; the Horizon Class A Diesel, which was named RV of the Year by RVBusiness magazine; and the Class B Revel, which was awarded Best in Show at the RVIA Trade Show. On the Towable side, we introduced a new Winnebago branded fifth-wheel and Grand Design RVs new Transcend line, a differentiated product marking the brands introduction to the Stick-and-Tin segment, which should benefit the back half of Fiscal 2018. Our previously-announced Towable capacity expansion projects continue moving forward as we position our business to ensure supply keeps pace with future expected demand.

Back in 2014, Winnebago Industries was in our Small Cap NetworkElite Opportunity Pro (EOP) portfolio as we believed the Company would benefit from lower gas prices along with a Baby Boomer generation whos recreational retirement spendingwould beincreasing. Ournewsletter noted at the time:

With respect to Winnebago, with oil prices coming way down there’s a good argument we could see American travelers strongly stepping back into the idea of purchasing more RV’s and motorhomes over the next several years. We’ve got tremendous domestic energy production here at home now and since we don’t see this ongoing trend changing anytime soon, as well as considering our ongoing theme over the last few years of profiting from the aging boomer, I think there’s a strong likelihood we could see stocks like WGO benefit over the next several years.”

“The idea of the aging boomer buying these vehicles for recreational retirement is nothing to downplay. The boomer generation is and has been the largest consumers in the world over the last 20 years and that’s likely not changing anytime soon.

A technical chart for Winnebago Industriesshows shares taking off during the summer and more than doubling since then:

A long term performance chart shows shares of Winnebago Industriesalong withmid cap peers Thor Industries, Inc (NYSE: THO) and LCI Industries (NYSE: LCII) all giving a very similar performance and largely taking off starting in 2016:

Finally, here is a quick recap of small cap Winnebago Industries recent earnings history along with EPS estimate trends from the Yahoo! Finance analyst estimates page going into the current earnings report:

Earnings History11/29/20162/27/20175/30/20178/30/2017
EPS Est. 0.31 0.45 0.72 0.7
EPS Actual 0.42 0.48 0.61 0.79
Difference 0.11 0.03 -0.11 0.09
Surprise % 35.50% 6.70% -15.30% 12.90%
EPS TrendCurrent Qtr. (Nov 2017)Next Qtr. (Feb 2018)Current Year (2018)Next Year (2019)
Current Estimate 0.52 0.57 2.89 3.39
7 Days Ago 0.52 0.57 2.89 3.39
30 Days Ago 0.51 0.57 2.9 3.37
60 Days Ago 0.45 0.54 2.77 3.22
90 Days Ago 0.44 0.54 2.73 3.08

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