Thor Industries (THO) earnings release review for the 3rd quarter of their 2021 fiscal year
Category: Thor Industries (THO)
Date: 9 June 2021 Stock Price of Thor Industries: $115.60 We take a look at the 3rd quarter earnings release of their 2021 fiscal year of Thor Industries the world's largest manufacturer of recreational vehicles (RVs). For the quarter net sales came in at $3.46 billion and net income came in at $182.7 million. So net sales reported is record sales for the group.
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We have increased our production levels, often with modest capital expenditures, and intend to continue to increase production levels to address the ongoing, robust consumer and dealer demand for THOR Industries RV products, while also managing through continuing supply chain challenges - Bob Martin, President and CEO of THOR Industries."
About Thor Industries (THO)
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 2021 earnings
- Record net sales for the third quarter were $3.46 billion, an increase of 105.7% as compared to the third quarter of the prior year. Third-quarter results include $2.50 billion in North American RV net sales and $894.2 million in European RV net sales.
- Consolidated gross profit margin for the third quarter was 14.6%, a 240 basis point improvement over the comparable prior-year period.
- Record earnings per share for the third quarter were $3.29 per diluted share, an increase of 665.1% as compared to $0.43 per diluted share in the same period of the prior year.
- Consolidated RV backlog as of April 30, 2021 was $14.32 billion, an increase of nearly 550% over RV backlog as of April 30, 2020.
- Senior Secured Term Loan B facility was repriced, and the Company expects to reduce cash interest expense by approximately $13 million on an annualized basis.
- Consolidated gross profit margin for the third quarter was 14.6%, a 240 basis point improvement over the comparable prior-year period.
- Record earnings per share for the third quarter were $3.29 per diluted share, an increase of 665.1% as compared to $0.43 per diluted share in the same period of the prior year.
- Consolidated RV backlog as of April 30, 2021 was $14.32 billion, an increase of nearly 550% over RV backlog as of April 30, 2020.
- Senior Secured Term Loan B facility was repriced, and the Company expects to reduce cash interest expense by approximately $13 million on an annualized basis.
Thor Industries' management commentary on their 3rd quarter 2021 earnings
THOR Industries sees continued strong production levels well into calendar 2022. Demand for THOR Industries products remains robust at the retail level, and dealer inventory levels remain historically low.
ELKHART, Ind., June 8, 2021 /PRNewswire/ -- THOR Industries, Inc. (NYSE: THO) today announced record results for the third fiscal quarter ended April 30, 2021.
"We posted record results in our third fiscal quarter, achieving both the highest quarterly net sales and net income figures in the history of THOR Industries. These results show that growth continued unabated after the initial temporary shutdown of our dealers and THOR Industries' production lines in late March through the end of April of last year due to the pandemic. We have increased our production levels, often with modest capital expenditures, and intend to continue to increase production levels to address the ongoing, robust consumer and dealer demand for THOR Industries RV products, while also managing through continuing supply chain challenges," said Bob Martin, President and CEO of THOR Industries.
"Demand for our products continues to grow at both the retail and wholesale levels. While our pace of production and shipments has accelerated, demand is so high that independent dealer inventories of THOR Industries products continue to decline while dealer sales are increasing. This increasing consumer demand has driven our order backlog to more than $14 billion at the end of the quarter and includes units that will be needed to restock depleted dealer inventories. Since a significant number of units in our backlog have already been retail sold, we currently believe the restocking cycle will extend well into calendar 2022," said Martin.
ELKHART, Ind., June 8, 2021 /PRNewswire/ -- THOR Industries, Inc. (NYSE: THO) today announced record results for the third fiscal quarter ended April 30, 2021.
"We posted record results in our third fiscal quarter, achieving both the highest quarterly net sales and net income figures in the history of THOR Industries. These results show that growth continued unabated after the initial temporary shutdown of our dealers and THOR Industries' production lines in late March through the end of April of last year due to the pandemic. We have increased our production levels, often with modest capital expenditures, and intend to continue to increase production levels to address the ongoing, robust consumer and dealer demand for THOR Industries RV products, while also managing through continuing supply chain challenges," said Bob Martin, President and CEO of THOR Industries.
"Demand for our products continues to grow at both the retail and wholesale levels. While our pace of production and shipments has accelerated, demand is so high that independent dealer inventories of THOR Industries products continue to decline while dealer sales are increasing. This increasing consumer demand has driven our order backlog to more than $14 billion at the end of the quarter and includes units that will be needed to restock depleted dealer inventories. Since a significant number of units in our backlog have already been retail sold, we currently believe the restocking cycle will extend well into calendar 2022," said Martin.
"Our third-quarter results reflect the continued strong demand for our RVs and the fact that we increased production volumes in each of our business segments to address the increased demand from our dealers. Our ability to ramp up production to address the increased demand from our dealers is reflected in our record results. For the third quarter of fiscal 2021, unit shipments increased by 113% for our North American Towable segment, 148% for our North American Motorized segment and nearly 34% for our European RV segment. While we reported excellent results, the supply chain continues to be a constraint for the RV industry and THOR Industries alike, limiting our ability to further increase production to meet increased levels of dealer demand. THOR Industries is implementing various supply chain strategies to minimize these constraints while also working closely with our suppliers," said Colleen Zuhl, THOR Industries' Senior Vice President and Chief Financial Officer.
"Working capital has increased year-to-date due to higher levels of accounts receivable as a result of strong sales, more unfinished units due to supply chain constraints, the introduction of new models which necessitate higher levels of on-hand raw materials including chassis, and the higher production rates which also necessitate higher levels of on-hand inventory. Year-to-date we have generated strong operating cash flows of $175.1 million even with the increase in working capital. We also successfully repriced our Senior Secured Term Loan B facility, which we estimate will generate cash interest savings of approximately $13 million on an annualized basis. We continue to effectively manage our balance sheet and liquidity with cash of $294.6 million and availability under our asset-based revolving credit facility of approximately $610 million as of April 30, 2021," concluded Zuhl.
Outlook
"We continue to see robust demand for our RVs and see no signs of demand slowing even as the economy recovers from the pandemic. The most recent RVIA forecast projects total North American wholesale RV shipments of approximately 576,100 units in calendar year 2021, representing an increase of 33.8% over 2020. We are focused on strategically increasing capacity and maximizing production efficiencies to fulfill the growing demand from our dealers. Ultimately, however, the number of THOR Industries units shipped in both fiscal and calendar 2021 depends on our ability to manage through the ongoing global supply chain issues. We have numerous team members throughout the organization focused on resolving near-term supply chain shortages while also pursuing long-term solutions to avoid potential future issues," said Martin.
"This is the first quarter in which Tiffin Group was fully included in our quarterly results, and I'd like to say that we are very pleased with the acquisition and with the Tiffin Team. The integration is going as planned, and we see a bright future for our combined companies.
"Looking ahead, we expect long-term health in the RV industry. We see the increased interest in the outdoors and RV lifestyle as a fundamental shift in consumer preferences, a shift that began before the pandemic and picked up steam over the last year. It is a trend we believe will continue to grow throughout our global marketspace. As one example of the underlying data supporting our optimism, we are seeing growth in two areas that have historically been frequent paths-to-purchase for the first-time RV buyer; outdoor camping and RV rentals. In its recently released 2021 annual camping report, Kampgrounds of America ("KOA") estimated that there were more than 10 million new households camping in calendar 2020 and estimated that an additional 4.3 million people will try camping in 2021 for the first time. KOA also projects that there will be 52.6 million camping households in 2021. In addition to new campers, the industry saw a sizeable increase in the number of RV rentals in 2020. The findings of THOR Industries 2020 RV Rental Study support the belief that those who rent an RV have a high propensity to eventually purchase an RV. These indicators, when combined with our robust order backlog and the historical 3 to 5-year trade-in cycle of current RV owners, reaffirm our belief that strong demand for THOR Industries products is sustainable over the coming months and years," concluded Martin.
"Working capital has increased year-to-date due to higher levels of accounts receivable as a result of strong sales, more unfinished units due to supply chain constraints, the introduction of new models which necessitate higher levels of on-hand raw materials including chassis, and the higher production rates which also necessitate higher levels of on-hand inventory. Year-to-date we have generated strong operating cash flows of $175.1 million even with the increase in working capital. We also successfully repriced our Senior Secured Term Loan B facility, which we estimate will generate cash interest savings of approximately $13 million on an annualized basis. We continue to effectively manage our balance sheet and liquidity with cash of $294.6 million and availability under our asset-based revolving credit facility of approximately $610 million as of April 30, 2021," concluded Zuhl.
Outlook
"We continue to see robust demand for our RVs and see no signs of demand slowing even as the economy recovers from the pandemic. The most recent RVIA forecast projects total North American wholesale RV shipments of approximately 576,100 units in calendar year 2021, representing an increase of 33.8% over 2020. We are focused on strategically increasing capacity and maximizing production efficiencies to fulfill the growing demand from our dealers. Ultimately, however, the number of THOR Industries units shipped in both fiscal and calendar 2021 depends on our ability to manage through the ongoing global supply chain issues. We have numerous team members throughout the organization focused on resolving near-term supply chain shortages while also pursuing long-term solutions to avoid potential future issues," said Martin.
"This is the first quarter in which Tiffin Group was fully included in our quarterly results, and I'd like to say that we are very pleased with the acquisition and with the Tiffin Team. The integration is going as planned, and we see a bright future for our combined companies.
"Looking ahead, we expect long-term health in the RV industry. We see the increased interest in the outdoors and RV lifestyle as a fundamental shift in consumer preferences, a shift that began before the pandemic and picked up steam over the last year. It is a trend we believe will continue to grow throughout our global marketspace. As one example of the underlying data supporting our optimism, we are seeing growth in two areas that have historically been frequent paths-to-purchase for the first-time RV buyer; outdoor camping and RV rentals. In its recently released 2021 annual camping report, Kampgrounds of America ("KOA") estimated that there were more than 10 million new households camping in calendar 2020 and estimated that an additional 4.3 million people will try camping in 2021 for the first time. KOA also projects that there will be 52.6 million camping households in 2021. In addition to new campers, the industry saw a sizeable increase in the number of RV rentals in 2020. The findings of THOR Industries 2020 RV Rental Study support the belief that those who rent an RV have a high propensity to eventually purchase an RV. These indicators, when combined with our robust order backlog and the historical 3 to 5-year trade-in cycle of current RV owners, reaffirm our belief that strong demand for THOR Industries products is sustainable over the coming months and years," concluded Martin.
Thor Industries (THO) stock price chart over the last 5 years
The image below shows the stock price history of Thor industries (NYSE: THO) over the last 5 years. And it's been a good time for Thor industries (NYSE: THO) stockholders. Over the last 5 years the stock of Thor returned 70.2%.
Thor industries (NYSE: THO) is also trading at a lot closer to its 52 week high than it is to its 52 week low 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 than it is to its 52 week low which to us is a clear indication that the short term sentiment and momentum of Thor industries stock is very positive
Thor Industries (THO) stock vs Winnebago (WGO) over the last 5 years
The image below shows the stock price performance of Thor Industries (THO) and Winnebago (WGO) over the last 5 years. While both are active in the RV sales sector and their stock price trends are similar, the stock price returns are very different. The summary below shows the stock price returns provided by both these firms over the last 5 years
The stock of Winnebago has easily outperformed that of Thor Industries over the last 5 years.
- Winnebago: 207.2%
- Thor Industries: 70.2%
The stock of Winnebago has easily outperformed that of Thor Industries over the last 5 years.
Thor Industries (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 $98.40 a stock (up from our 1st quarter 2021 valuation of Thor Industries).thor-industries-q1-2021-earnings-report-review-9december2020
We therefore believe that Thor Industries stock is overvalued at its current price around $115 and we would not recommend long term fundamental or value investors buy into the stock of Thor Industries at its current price.
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price), which in this case is $98.40 in this case.
A good entry into the stock of Thor Industries (THO) would therefore be at $88.60 or below.
We expect that stock of Thor Industries to pull back strongly from current levels to levels closer to our target price (full value price) in coming weeks and months. As the stock of Thor Industries is trading at well above our suggested entry point we rate the stock of Thor as a sell
We therefore believe that Thor Industries stock is overvalued at its current price around $115 and we would not recommend long term fundamental or value investors buy into the stock of Thor Industries at its current price.
We usually recommend that long term fundamental or value investors look to enter the stock at least 10% below our target price (full value price), which in this case is $98.40 in this case.
A good entry into the stock of Thor Industries (THO) would therefore be at $88.60 or below.
We expect that stock of Thor Industries to pull back strongly from current levels to levels closer to our target price (full value price) in coming weeks and months. As the stock of Thor Industries is trading at well above our suggested entry point we rate the stock of Thor as a sell
Next earnings release of Thor Industries
It is expected that Thor Industries will release their 4th quarter 2021 earnings report in early September 2021