Thor Industries; Loving The Van Life
Thor Industries (NYSE:THO) just reported a strong quarter and improved guidance and I am not surprised. The #vanlife is a wildly popular and rapidly growing phenomenon that has only been accelerated by the pandemic (where have I heard that before?). Not only are people of all ages turning to RV’s, vans, and motorhomes as an alternative form of residence but also to socially-distanced forms of recreation. And Thor Industries is a God of the RV industry.
I think, for most readers, all I have to say is Airstream to make you understand the power of this brand. Airstream is the most recognizable and long-lasting brand of American RV on the market today and only the tip of the iceberg as far as Thor’s lineup goes. The company sells RVs of all types in three broad categories; US Towables, US Motorhomes, and European RV. Within those, you will find everything from a simple trailer for pulling gear all the way through full-sized tour-quality bus-type motorhomes and all the gear, accessories, maintenance, and aftermarket parts you can think of.
Thor Reports A Strong Q4 And Guides A Stronger 2021
The top-line results aren’t spectacular in comparison to some other pandemic-winners but they’re good, the bottom-line results are better, there’s growth in the forecast, there’s a value to be had, and there’s a healthy dividend to consider.
So, revenue came in at $2.32 billion. That’s up 0.4% from last year and $40 million above consensus. On a segment basis, the U.S. Motorhome business was the only weak spot with revenue shrinking -5.4% on a YOY basis. To me, that’s not surprising because the big RV’s are the most expensive to own and the hardest to maintain, especially for a wave of newbie #van-lifers. And that is seen echoed in the report.
The U.S. Towables and EU RV businesses both saw growth. The U.S. segment revenue grew 1.7% and the EU 2.8% on a product mix shift compounded by price increases in the EU. Moving down the report, the margins expanded by 50 basis points to 14.5% and beat consensus by a full percentage point. This is due in part to higher realized prices in the EU, product mix shift, lower costs related to warranty issues, and management-led cost-savings initiated at the start of the pandemic. On the bottom line, GAAP EPS came in at $2.14, $0.76 better than consensus, and up 25% from the previous year.
As for guidance, the outlook is good. The company is expecting consolidated growth in the range of 20% in 2021 with the bulk of that growth in towables and smaller gas-powered vans and motorhomes.
"Looking ahead, we expect a year of continued growth in fiscal 2021, and we concur with RVIA's recent RoadSigns most likely forecast of an approximate 19.5% increase in calendar 2021 shipments over their most likely estimate for calendar 2020 shipments", said Bob Martin, President and CEO.
Thor Industries Safe And Growing Dividend
Looking at the dividend, the stock is yielding about 1.70% which is in-line with the broader market. The difference is that Thor Industries dividend has been growing for 9-years with a double-digit CAGR. Based on the payout ratio, the cash position, the low-debt situation, earnings, and the outlook for earnings I have no doubt the company will increase the payout again.
"Our cash and cash equivalents totaled $538.5 million at the end of the year, and we currently have approximately $660 million available for borrowing on our ABL. Our priorities for cash remain consistent with our historical priorities, which are (1) reducing our debt obligations (2) paying and growing our dividend over time, and (3) funding our growth both organically and opportunistically through acquisitions,” said Colleen Zuhl, Thor's Senior Vice President and Chief Financial Officer.
The Technical Outlook: A Short-Squeeze Is On
I’ll be honest, the chart of Thor Industries price-action looks a little iffy going into the report. The stock is set up for another down-leg so I am not too surprised the short-interest is over 10%. The shorts, I think, were surprised by this morning’s news which is why price action is back above the short-term moving average in the premarket session. Now it looks like a reversal is in play and that could be accelerated by short-covering over the few days. A simple move up to retest the post-COVID high is worth about 30%.
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