LCI Industries Growth Outlook Is Well-Supported
If you are familiar with LCI Industries (NYSE:LCII) then it should be no surprise the company just reported a strong quarter. LCI Industries manufactures and markets components for the RV industry and the RV industry is booming. The last estimates had 2021 growth for the RV industry in the range of 30% and that estimate might be too low. The back logs are so great if the OEM manufacturers are able to ramp their production there is no limit to the growth they can post this year.
The only thing holding the RV industry back is available parts and the manpower to put them together. Our contact within the RV industry, a custom RV retrofitter, tells us that inventory is so tight his business is running at a near stand-still waiting for parts. What that means for LCI Industries is guaranteed business for the next year or more. If they can make the product then they can sell it, and they are making products as fast as they can.
“We believe that retail tailwinds, which supported our growth in 2020, will remain elevated well into 2021 and beyond. Strong demand for recreational products continues, bolstered by expanded accessibility from popular services like peer-to-peer rentals and remote work and school, along with the significant reduction in air travel, all of which draw more consumers into the outdoor lifestyle,” said LCI Industries CEO in the press release.
LCI Industries Wasn’t Lounging Around In the 4th Quarter
LCI Industries had a very robust 4th quarter due in large part to the increase in demand caused by the pandemic and to a lesser degree acquisitions. The net consolidated revenue came in at $783 million or up 38.8% from last year and 830 basis points better than the consensus. Acquisitional growth accounted for about 1000 bps of that growth with still leaves organic revenue growth in the range of 28.8%.
On a segment basis, the RV OEM market which is about 55% to 60% of the business grew by 25% over last year. The Adjacent Industries OEM market also saw a strong 20% growth but it is the aftermarket segment that really stands out. Sales of Aftermarket products jumped 129% and appears to be accelerating.
Moving down the report the details only get better. The company was able to leverage both sales volume and internal efficiencies to drive margin improvement at the gross and operational levels. This led to a disproportionate increase in earnings that resulted in a 69% surge in net income and a smaller 54% increase in adjusted EBITDA. What does this mean for the bottom line? Both GAAP and Adjusted EPS came in at $1.92 and beat the consensus by $0.14 and $.013 respectively.
The company did not offer any guidance but did give an update on the 2021 business. Execs say the January 2021 sales figures are up 38% from last year due to higher RV production and elevated retail demand. If that trend holds true for the remainder of the quarter the company could see its revenue accelerate sequentially by 16% or more to set a record near $910 million.
LCI Industries, A Comfortable Dividend To Ride Out The Rebound
LCI Industries pays an attractive dividend yielding 2.0% with shares trading near $150. The company has been increasing the distribution for the last four years as well, and there is ample room on the books for them to do it. The payout ratio is running about 35% of the consensus estimates for the year which provides plenty of cash flow. The balance sheet has some debt on it but it is only a modest amount. The company is lightly levered, with good coverage and plenty of free cash flow so no reason not to expect another increase in the second half of 2021.
The Technical Outlook: LCII Is Ready To Ride Higher
Shares of LCII had a bit of volatility in the wake of the report but the bulls won. Support was confirmed at the short-term moving average and a new high has been set. With the indicators supporting the move it looks like this stock could continue moving higher over the near to short term at least. The next target for resistance is near the $170 level and may be reached within the next several weeks.
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