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Category: Stock Market and Thor Industries
Date: 8 June 2020 Stock Price: $100 We take a look at the 3rd quarter earnings release of their 2020 fiscal year of Thor Industries the world's largest manufacturer of recreational vehicles (RVs). The group earnings surprised considering that dealerships were closed during covid-19 related lockdowns and stay at home orders.
I would like to thank the team members at Thor Industries and all of our subsidiaries for their incredible dedication and commitment to Thor and for their contributions to our results during this highly uncertain period. - Bob Martin, President and CEO" |
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' 3rd quarter 2020 earnings report
The data below refers to the latest quarter unless specified otherwise
- Net sales: $1.681 billion (down from $2.506 billion from the same quarter of the previous year)
- Sales decreased by -32.9% over the last 12 months
- Net income $24.068 million (up from $32.684 million for the same quarter of the previous year)
- Diluted earnings per share: $0.43 (down from $0.59 for the same quarter of the previous year)
- Diluted weighted-average shares outstanding: 55.392 million (down from 55.160 million for the same quarter of the previous year)
- Cash and cash equivalents: $654.965 million
- Cash and cash equivalents per share: $11.82
- Cash and cash equivalents makes up 11.82% of Thor Industries' market capital
- Cash and cash equivalents makes up 11.7% of Thor Industries' total assets
- Inventories: $867.674 million
- Inventories makes up 15.5% of Thor Industries' total assets
- Accounts receivable: $514.794million
- Accounts receivable makes up 9.2% of Thor Industries' total assets
- Stockholders equity in Thor Industries: $2.111 billion
- Stockholders equity per share for Thor Industries: $38.11
- Thor Industries is trading at 2.62 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.
- For comparison the average price to book value of companies in the S&P 500 is 3.7. Read more about the S&P500 here.
Thor Industries' management commentary on their 3rd quarter 2020 earnings report
ELKHART, Ind., June 8, 2020 /PRNewswire/ -- Thor Industries, Inc. (NYSE: THO) today announced results for the third quarter of fiscal 2020, which ended April 30, 2020.
"Despite this being one of the most unusual quarters I have ever experienced, I am pleased to report that we were profitable and generated positive net cash from operations. Our financial position has remained strong as a result of numerous management-led actions that were executed quickly in conjunction with our temporary plant shut-downs in mid-March. Our results are the product of both the highly variable cost structure we have created and our ability to quickly align our production and cost structure to meet fast-changing market conditions," said Bob Martin, President and CEO of Thor Industries. "I would like to thank the team members at Thor Industries and all of our subsidiaries for their incredible dedication and commitment to Thor and for their contributions to our results during this highly uncertain period," added Martin.
COVID-19 Impact
COVID-19 and the related governmental mandates implemented to slow its spread in North America and Europe had a significant negative impact on the Company's results of operations for the third quarter of fiscal 2020. Consolidated net sales, gross profit, North American and European wholesale shipments and retail sales were all negatively affected during the quarter.
For nearly half of the quarter, retail consumers were under strict shelter-in-place requirements in most North American and European locations, limiting their ability to buy the Company's products from our independent dealers. The operations of the Company's independent dealers were likewise disrupted as many of them were required to close their showrooms. Due to these dealer closures, sales and shipments of our products were disrupted in the second half of March and April, two of our normally strongest sales and shipment months. Sales and backlog for May, the first month of our fourth fiscal quarter, improved on a weekly basis as dealers began to reopen their dealerships and consumer demand increased.
During the quarter, the Company initiated numerous actions to actively manage both our costs and liquidity in response to the initial extreme uncertainty created by the pandemic. In mid-March, the Company temporarily suspended production at all of its North American RV production facilities and temporarily suspended a substantial portion of its European RV production. Beginning in March and throughout the remainder of the third quarter, the Company furloughed or laid off a number of valuable team members, primarily in our U.S.-based operations, and many employees across the Company saw a reduction in their cash compensation. In addition, the Company also significantly reduced its discretionary spend and curtailed spending on most capital projects. Due to the high degree of uncertainty that existed initially related to the impact or duration of the various governmental shut-downs, and out of an abundance of caution, the Company drew $250 million against its asset-based line of credit in late March to enhance its liquidity position. In late May, the Company repaid this borrowing.
"Despite this being one of the most unusual quarters I have ever experienced, I am pleased to report that we were profitable and generated positive net cash from operations. Our financial position has remained strong as a result of numerous management-led actions that were executed quickly in conjunction with our temporary plant shut-downs in mid-March. Our results are the product of both the highly variable cost structure we have created and our ability to quickly align our production and cost structure to meet fast-changing market conditions," said Bob Martin, President and CEO of Thor Industries. "I would like to thank the team members at Thor Industries and all of our subsidiaries for their incredible dedication and commitment to Thor and for their contributions to our results during this highly uncertain period," added Martin.
COVID-19 Impact
COVID-19 and the related governmental mandates implemented to slow its spread in North America and Europe had a significant negative impact on the Company's results of operations for the third quarter of fiscal 2020. Consolidated net sales, gross profit, North American and European wholesale shipments and retail sales were all negatively affected during the quarter.
For nearly half of the quarter, retail consumers were under strict shelter-in-place requirements in most North American and European locations, limiting their ability to buy the Company's products from our independent dealers. The operations of the Company's independent dealers were likewise disrupted as many of them were required to close their showrooms. Due to these dealer closures, sales and shipments of our products were disrupted in the second half of March and April, two of our normally strongest sales and shipment months. Sales and backlog for May, the first month of our fourth fiscal quarter, improved on a weekly basis as dealers began to reopen their dealerships and consumer demand increased.
During the quarter, the Company initiated numerous actions to actively manage both our costs and liquidity in response to the initial extreme uncertainty created by the pandemic. In mid-March, the Company temporarily suspended production at all of its North American RV production facilities and temporarily suspended a substantial portion of its European RV production. Beginning in March and throughout the remainder of the third quarter, the Company furloughed or laid off a number of valuable team members, primarily in our U.S.-based operations, and many employees across the Company saw a reduction in their cash compensation. In addition, the Company also significantly reduced its discretionary spend and curtailed spending on most capital projects. Due to the high degree of uncertainty that existed initially related to the impact or duration of the various governmental shut-downs, and out of an abundance of caution, the Company drew $250 million against its asset-based line of credit in late March to enhance its liquidity position. In late May, the Company repaid this borrowing.
"Our business was built with the ability to manage through cyclicality, and our management actions, combined with our highly variable cost model, allowed us to remain profitable and generate positive net cash from operations for the third quarter," said Colleen Zuhl, Thor's Senior Vice President and Chief Financial Officer.
"In the third quarter, as we focused on maximizing liquidity, we borrowed $250 million from our ABL. Given the current strength of the RV market, particularly in North America, and the reopening of many of our independent dealers as well as many campground facilities, the current outlook is much clearer than it was at the end of March and early April. As a result, we have repaid the $250 million draw, and the available balance on our ABL was $396 million as of June 5, 2020.
"Additionally, during the quarter prior to the pandemic affecting our operations, we continued to pay down our acquisition-related Term Loan B ("TLB") debt. In March, we made payments of $45 million on our TLB. Life-to-date, payments on our acquisition-related debt of $2.2 billion totals approximately $543 million.
"We are confident our current liquidity and financial position will allow us to manage through near-term uncertainties that may arise within the RV market or the broader economy," added Zuhl.
Promoting the RV Lifestyle
The Company continues to invest in generating awareness for the RV lifestyle through engaging content and directing consumers to its operating companies for further research and to pursue purchasing options through our extensive dealer body. Thor also conducted and published the RV industry's first comprehensive report detailing North American RV consumer travel and purchase intent since the onset of the pandemic.
Outlook
Bob Martin said, "To be certain, the events of this quarter were unexpected and difficult, but our experienced team members and our highly variable cost model once again proved our ability to quickly navigate through uncertainty and generate positive financial results. "Today, market indicators in North America are increasingly positive. Every North American dealer I have spoken to in the last few weeks has been very excited about the pace at which sales are picking up. Many of our dealers are reporting a significant improvement in sales from April to May and are excited about the sales potential for June and beyond. Because of this improved outlook and the relaxation of many stay-at-home restrictions, we began to restart production in the first week of May in North America. We have been successful in safely bringing our people back to work, and we are ramping-up production in a measured way in order to keep our team members safe and product quality high, while also fulfilling dealer orders as quickly as possible.
"In Europe, with over 1,200 dealer-partners in Germany and across the continent, our brands have one of the strongest dealer and service networks, and our long-term outlook for future growth in retail sales remains positive. More and more people are discovering RVs as a way to support their lifestyle of independence and individuality, as well as using the RV as a multi-purpose vehicle to escape urban life and explore outdoor activities and nature. While we are optimistic about the long-term growth of the RV market in Europe, the outlook for European RV retail sales for the remainder of the calendar year depends upon the economic conditions in the countries in which we do business.
"Since the end of our third fiscal quarter, our outlook for the balance of our fiscal year and the calendar year has markedly improved. We're seeing an influx of first-time buyers, which bodes well for the long-term health of the RV industry. When the COVID-19 pandemic started, we saw many people start to work at home. One new trend we are seeing is an evolution from 'work at home' to 'work from anywhere' as RV buyers use their new RVs as their office wherever they are, or wherever they want to be. Our channel checks tell us that many of our independent RV dealers are seeing a significant resurgence in their sales, and their inventory levels, which were already down 20% year-over-year, are further declining. Demand for our products is very strong. Our flexible business model gives us the ability to quickly ramp production in a focused way, and we will ramp production with three primary objectives: the safety of our team members, the quality of our products, and the speed of our production, in that order. We remain steadfast in our confidence in the long-term outlook for not only our business, but the entire RV industry, and we continue to look forward to a bright future." said Martin.
"In the third quarter, as we focused on maximizing liquidity, we borrowed $250 million from our ABL. Given the current strength of the RV market, particularly in North America, and the reopening of many of our independent dealers as well as many campground facilities, the current outlook is much clearer than it was at the end of March and early April. As a result, we have repaid the $250 million draw, and the available balance on our ABL was $396 million as of June 5, 2020.
"Additionally, during the quarter prior to the pandemic affecting our operations, we continued to pay down our acquisition-related Term Loan B ("TLB") debt. In March, we made payments of $45 million on our TLB. Life-to-date, payments on our acquisition-related debt of $2.2 billion totals approximately $543 million.
"We are confident our current liquidity and financial position will allow us to manage through near-term uncertainties that may arise within the RV market or the broader economy," added Zuhl.
Promoting the RV Lifestyle
The Company continues to invest in generating awareness for the RV lifestyle through engaging content and directing consumers to its operating companies for further research and to pursue purchasing options through our extensive dealer body. Thor also conducted and published the RV industry's first comprehensive report detailing North American RV consumer travel and purchase intent since the onset of the pandemic.
Outlook
Bob Martin said, "To be certain, the events of this quarter were unexpected and difficult, but our experienced team members and our highly variable cost model once again proved our ability to quickly navigate through uncertainty and generate positive financial results. "Today, market indicators in North America are increasingly positive. Every North American dealer I have spoken to in the last few weeks has been very excited about the pace at which sales are picking up. Many of our dealers are reporting a significant improvement in sales from April to May and are excited about the sales potential for June and beyond. Because of this improved outlook and the relaxation of many stay-at-home restrictions, we began to restart production in the first week of May in North America. We have been successful in safely bringing our people back to work, and we are ramping-up production in a measured way in order to keep our team members safe and product quality high, while also fulfilling dealer orders as quickly as possible.
"In Europe, with over 1,200 dealer-partners in Germany and across the continent, our brands have one of the strongest dealer and service networks, and our long-term outlook for future growth in retail sales remains positive. More and more people are discovering RVs as a way to support their lifestyle of independence and individuality, as well as using the RV as a multi-purpose vehicle to escape urban life and explore outdoor activities and nature. While we are optimistic about the long-term growth of the RV market in Europe, the outlook for European RV retail sales for the remainder of the calendar year depends upon the economic conditions in the countries in which we do business.
"Since the end of our third fiscal quarter, our outlook for the balance of our fiscal year and the calendar year has markedly improved. We're seeing an influx of first-time buyers, which bodes well for the long-term health of the RV industry. When the COVID-19 pandemic started, we saw many people start to work at home. One new trend we are seeing is an evolution from 'work at home' to 'work from anywhere' as RV buyers use their new RVs as their office wherever they are, or wherever they want to be. Our channel checks tell us that many of our independent RV dealers are seeing a significant resurgence in their sales, and their inventory levels, which were already down 20% year-over-year, are further declining. Demand for our products is very strong. Our flexible business model gives us the ability to quickly ramp production in a focused way, and we will ramp production with three primary objectives: the safety of our team members, the quality of our products, and the speed of our production, in that order. We remain steadfast in our confidence in the long-term outlook for not only our business, but the entire RV industry, and we continue to look forward to a bright future." said Martin.
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 been a pretty average time for Thor industries (NYSE: THO) stockholders. 5 years ago the stock was trading at around $59 and its currently trading at $100. Thats a strong return of 69.6% provided to Thor Industries stockholders over the last 5 years.
Thor industries (NYSE: THO) is also trading at a lot closer to its 52 week high of $103.99 than it is to its 52 week low of $32.30 which to us is a clear indication that the short term sentiment and momentum of Thor industries stock is very positive
Thor industries (NYSE: THO) is also trading at a lot closer to its 52 week high of $103.99 than it is to its 52 week low of $32.30 which to us is a clear indication that the short term sentiment and momentum of Thor industries stock is very positive
Recent Google searches trends for Thor stock price and THO stock price
The graphic below shows recent google search trends for THO stock price and Thor stock price over the last 12 months in the United States as obtained from google trends. And as it shows interest in THO stock price and Thor stock price is very limited.
Recent coverage of Thor Industries
The extract below covers the latest regarding Thor Industries as obtained from CNBC.com
Thor Industries (THO) – The recreational vehicle maker reported fiscal third-quarter profit of 43 cents per share, compared to analysts’ expectations of a quarterly loss. Revenue also beat Street forecasts. Thor said it was able to adjust its cost structure to deal with the negative impact of the Covid-19 pandemic, and that sales began to improve in May as dealerships reopened.
Read the full article here
Thor Industries (THO) – The recreational vehicle maker reported fiscal third-quarter profit of 43 cents per share, compared to analysts’ expectations of a quarterly loss. Revenue also beat Street forecasts. Thor said it was able to adjust its cost structure to deal with the negative impact of the Covid-19 pandemic, and that sales began to improve in May as dealerships reopened.
Read the full article here
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 $67.40 a stock (up from our 2nd quarter valuation of Thor Industries largely due to their improved prospects for the next fiscal year considering their dealerships are opening again after Covid-19 lockdowns).
We therefore believe that Thor Industries stock is overvalued and we would not recommend long term fundamental or value investors buy into the stock of Thor Industries at its current price of $100
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target (full value) price, which in this case is $67.40 in this case. A good entry into the stock of Thor Industries (THO) would therefore be at $60.70 or below. We expect that stock of Thor Industries to pull back strongly from current levels to levels closer to our target (full value) price in coming weeks and months.
We therefore believe that Thor Industries stock is overvalued and we would not recommend long term fundamental or value investors buy into the stock of Thor Industries at its current price of $100
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target (full value) price, which in this case is $67.40 in this case. A good entry into the stock of Thor Industries (THO) would therefore be at $60.70 or below. We expect that stock of Thor Industries to pull back strongly from current levels to levels closer to our target (full value) price in coming weeks and months.
Next earnings release of Thor Industries
It is expected that Thor Industries will release their 4th quarter and full fiscal 2020 earnings report in September 2020