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Category: Stock Market and Thor Industries
Date: 30 September 2019 Stock Price: 48.92 We take a look at the 3rd quarter earnings release of their 2019 fiscal year of Thor Industries the world's largest manufacturer of recreational vehicles.
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About Thor Industries
Thor Industries, Inc. was founded on August 29, 1980, when Wade F. B. Thompson and Peter B. Orthwein acquired Airstream, the most recognized name in the industry. Despite its venerable image, Airstream had not fared well during the economic downturn of the late 1970s. By focusing on improving quality while reducing costs, Airstream returned to profitability in its very first year under the new Thor management. Thor is the sole owner of operating subsidiaries that, combined, represent the world’s largest manufacturer of recreational vehicles (RVs').
The group sells towable RVs and motorized RV's in markets such as North America and Europe.
The group sells towable RVs and motorized RV's in markets such as North America and Europe.
Overview of Thor Industries' latest earnings report
The numbers we are interested in (for the quarter):
- Revenue: $2.506 billion (up from $2.251 billion from the same quarter of the previous year)
- Revenue increased by 11.3% over the last 12 months
- Net income $31.438 million (down from $133.788 million for the same quarter of the previous year)
- Diluted earnings per share: $0.59 (down from $2.53 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 55.166 million (down from 52.853 million for the same quarter of the previous year)
- Cash and cash equivalents: $486.913 million
- Cash and cash equivalents per share: $8.82
- Cash and cash equivalents makes up 18.02% of Thor Industries' market capital
- Cash and cash equivalents makes up 8.15% of Thor Industries' total assets
- Inventories: $962.588 million
- Inventories makes up 16.11% of Thor Industries' total assets
- Accounts receivable: $841.111 million
- Accounts receivable makes up 14.08% of Thor Industries' total assets
- Stockholders equity in Thor Industries: $2.039 billion
- Stockholders equity per share for Thor Industries: $36.96
- Thor Industries is trading at 1.32 times its stockholders equity per share, which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- Stockholders equity per share for Thor Industries: $36.96
Thor Industries' management commentary on the results and earnings guidance
Elkhart, Indiana, June 10, 2019 – Thor Industries, Inc. (NYSE: THO) today announced third-quarter results with record net sales of $2.51 billion, compared with the previous sales record posted in the third quarter of the prior year. Current year third-quarter net sales include the net sales of EHG since the date of acquisition on February 1, 2019. Net income attributable to Thor and diluted earnings per share for the third quarter of fiscal 2019 were $32.7 million and $0.59, respectively. Third-quarter results include acquisition-related costs and purchase accounting adjustments related to the EHG acquisition, which total $74.8 million, or $1.06 per diluted share.
In addition, ongoing amortization expense and interest expense were incurred as a result of the acquisition which also impacted the third-quarter results. "EHG made a significant contribution to our top-line results for the quarter, and as we move through some of the transitional costs, we look forward to EHG's meaningful contribution to our bottom line as well,” said Bob Martin, Thor President and CEO. "This transformational acquisition is a critical first step in our long-term strategic plan to expand outside of the North American market. Beyond the acquisition, we have seen improvements in the operating results of our North American segments, reflecting a more stable environment as we finish the fiscal year.”
Outlook
With the completion of the EHG acquisition, Thor’s management team remains focused on creating long-term shareholder value by supporting both the integration of EHG, and the Company's growth in North America. To help drive that growth the Company recently announced the creation of two new senior management positions at Thor Industries in North America to provide incremental support to subsidiary leadership and help achieve key goals on an accelerated basis.
The Company has elevated two of its top RV leaders, Matt Zimmerman of Keystone and Chris Hermon of Heartland, to the newly-created roles of RV Group Managers. In their new roles, Matt and Chris will be assisting Thor's North American operating companies in their realization of key strategic initiatives, all of which are designed to improve the Company's offerings to its dealers and retail customers, increase engagement with its employees and improve its operating margins. "During the remainder of our fiscal 2019, we expect the North American dealer inventory rationalization will continue, but we expect to see a resumption of growth in the North American markets in 2020.
In Europe, we believe our dealer inventory levels of EHG products, while elevated in certain locations, are generally appropriate for seasonal consumer demand in Europe and are progressing towards more normalized levels," added Bob Martin. "Currently, our focus is on identifying and realizing the benefits of sharing best practices and operating efficiencies across Europe and North America, and continuing to optimize our working capital management processes.” “Having completed the EHG acquisition, we are now beginning the hard work of realizing the full value of EHG to our Company,” commented Peter B. Orthwein, Executive Chairman of Thor. “With the strong industry fundamentals and demographic tailwinds, we are confident that our strategic expansion into the European RV market will contribute to Thor's long-term growth, and provide the strong cash flow and returns on investment that our shareholders have come to expect from Thor.
The image below shows the numbers for the combined group (Thor Industries and the acquisition of Erwin Hymer Group) as well as the combined group's footprint and product mix (based on 2018 financial results)
In addition, ongoing amortization expense and interest expense were incurred as a result of the acquisition which also impacted the third-quarter results. "EHG made a significant contribution to our top-line results for the quarter, and as we move through some of the transitional costs, we look forward to EHG's meaningful contribution to our bottom line as well,” said Bob Martin, Thor President and CEO. "This transformational acquisition is a critical first step in our long-term strategic plan to expand outside of the North American market. Beyond the acquisition, we have seen improvements in the operating results of our North American segments, reflecting a more stable environment as we finish the fiscal year.”
Outlook
With the completion of the EHG acquisition, Thor’s management team remains focused on creating long-term shareholder value by supporting both the integration of EHG, and the Company's growth in North America. To help drive that growth the Company recently announced the creation of two new senior management positions at Thor Industries in North America to provide incremental support to subsidiary leadership and help achieve key goals on an accelerated basis.
The Company has elevated two of its top RV leaders, Matt Zimmerman of Keystone and Chris Hermon of Heartland, to the newly-created roles of RV Group Managers. In their new roles, Matt and Chris will be assisting Thor's North American operating companies in their realization of key strategic initiatives, all of which are designed to improve the Company's offerings to its dealers and retail customers, increase engagement with its employees and improve its operating margins. "During the remainder of our fiscal 2019, we expect the North American dealer inventory rationalization will continue, but we expect to see a resumption of growth in the North American markets in 2020.
In Europe, we believe our dealer inventory levels of EHG products, while elevated in certain locations, are generally appropriate for seasonal consumer demand in Europe and are progressing towards more normalized levels," added Bob Martin. "Currently, our focus is on identifying and realizing the benefits of sharing best practices and operating efficiencies across Europe and North America, and continuing to optimize our working capital management processes.” “Having completed the EHG acquisition, we are now beginning the hard work of realizing the full value of EHG to our Company,” commented Peter B. Orthwein, Executive Chairman of Thor. “With the strong industry fundamentals and demographic tailwinds, we are confident that our strategic expansion into the European RV market will contribute to Thor's long-term growth, and provide the strong cash flow and returns on investment that our shareholders have come to expect from Thor.
The image below shows the numbers for the combined group (Thor Industries and the acquisition of Erwin Hymer Group) as well as the combined group's footprint and product mix (based on 2018 financial results)
Thor Industries (NYSE: THO) stock price history
The image below, obtained from Google, shows the stock price history of Thor industries (NYSE: THO) over the last 5 years. And it's not been a very good time for Thor industries (NYSE: THO) stockholders. 5 years ago the stock was trading at around $52 and its currently trading at $48.92. While the stock price return over the 5 year period is not very negative at -5.9%, the opportunity cost of holding Thor industrials that lost almost 6% over the last 5 years while other stocks such as Netflix for example achieved returns of 300% over the same period, the real financial impact of holding Thor instead of something like Netflix becomes clear.
Thor industries (NYSE: THO) is also trading at a lot closer to its 52 week low of $42.05 than it is to its 52 week high of $86.04 which to us is a clear indication that the short term sentiment and momentum of Thor industries stock is very negative.
Thor industries (NYSE: THO) is also trading at a lot closer to its 52 week low of $42.05 than it is to its 52 week high of $86.04 which to us is a clear indication that the short term sentiment and momentum of Thor industries stock is very negative.
Thor Industries (NYSE: THO) latest stock valuation
So what are Thor Industries stock worth based on the release of their latest earnings report and the outlook provided. Based on the earnings reported our valuation models provide a target (full value) price for Thor Industries of $45 a stock. We therefore believe that Thor Industries stock is slightly overvalued and we would not recommend long term fundamental or value investors buy into the stock of Thor Industries at its current price. We recommend looking to enter the stock at least 10% below our target (full value) price of $45 in this case. A good entry into the stock of Thor Industries (THO) would therefore be at $40.50 or below