A Perfect Storm Lifts Camping World To New Highs
As strong as the trends in the RV industry are, even we’re surprised by Camping World’s (NYSE: CWH) Q1 results. The industry was recently forecast to grow at a 24% rate over last year and set a new high that, quite frankly, is still underestimating the market. Demand for RV’s and RV equipment is at a record high and faced with the lowest inventory we’ve seen in years. The pace of growth may slow over the coming years but growth is going to be strong regardless of the comp.
"There’s really continued customer demand. Inventory on dealer lots continues to be at historic lows because of the demand by consumers. Based on those two factors alone, it should be a really strong year for the industry," notes RVIA.
Camping World Blows Past The Consensus, Guides Higher
Unlike some others who’ve reported this week, Camping World shareholders were rewarded for the company’s strong results. The primary reasons are 1) revenue is up 51.5% from last year on strong demand and 2) the revenue of $1.56 billion beat the consensus mark by 1900 basis points. The strength was driven by both higher sales and higher realized prices in new and used vehicles that helped drive substantial improvement to margins and earnings.
The company’s unit growth of 38.7% was compounded by a strong 35.5% increase in profit per vehicle to aid a 395 basis point improvement in gross margin, all of which we like. The company is exhibiting earrings leverage that is working its way down to the bottom line as well. The net income margin improved to 9.5% from last year’s -1.4% loss while the adjusted EBITDA margin expanded nearly 900 basis points to 12.2%. As for earnings, Camping World reported $1.40 in both GAAP and adjusted earnings to beat the consensus by $0.71 and $0.66 respectively.
Execs at Camping World didn’t offer any formal guidance for revenue but did offer some outlook on earnings. The company is expecting its EBITDA earnings in a range of $770 to $810 million versus the previously guided $640 to $690 million. The new guidance assumes a sequential acceleration of earnings if not revenue that is supported by the industry data. If our estimations are correct, Camping World will be raising its guidance again later this year.
Camping World Is A Deep-Value Cash Generating Machine
Camping World is trading at a ridiculously low 9X earnings considering the strength of the growth, stickiness of the trends, the move toward EV RVs, and the health of the company. Camping World is sitting on a strong balance sheet and pays a very safe dividend for what you have to pay. The yield is fairly low at 0.82% but it is incredibly safe at only 6% of earnings and expected to grow. In addition, the company has been paying a regular special dividend that more than double the yield and isn’t expected to end.
The Technical Outlook: Short-Covering Takes Camping World To Resistance
Shares of Camping World spiked in the wake of the Q1 report but the move may be as much about short-covering as it is about the results. The short interest was running above 16% as of the last report and is likely adding fuel to this fire. Regardless, the price action is testing resistance at the previous all-time high and looking relatively strong. If the market can break above this level we see this stock moving up into the $60 to $70 range.
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