Time to Get into THOR Industries Stock at a Discount

Recreational vehicle (RV) maker THOR Industries NYSE: THO stock has been selling off on fears of slowing demand and pricing power erosion, despite blowout earnings and a record $16.86 billion backlog. Either the analysts are ahead of the curve or just dead wrong. Recreational and outdoor activities stocks were winners during the pandemic as they attracted newcomers to the endeavor amid isolation mandates to curb the spread. This became sticky as evidenced by the continued growth during the reopening. The question of whether rising interest rates will deter the demand is on the minds of investors and analysts alike. The pandemic accelerated the growth in mobile workspaces such as RVs and trailers. With shares trading at just 7.5X price-earnings, the stock is trading at a discount if the demand erosion doesn’t come true. Prudent investors seeking exposure in this segment at a discount can watch for opportunistic pullback levels in shares of THOR Industries.

Q4 FY 2021 Earnings Release

On Sept.28, 2021, THOR released its fiscal fourth-quarter 2021 results for the quarter ending July 2021. The Company reported a profit of $4.12 per share to blow out consensus analyst estimates for $2.88 per share by $1.52 per share and up 92.5% from year ago same period. Revenues rose 54.6% year-over-year (YoY) to $3.59 billion beating consensus analyst estimates for $3.32 billion. The consolidated RV backlog was $16.86 billion as of July 31, 2021, up over 190% YoY.

CEO Comments

THOR Industries CEO Bob Martin commented, “"We are pleased to report that in a year of unprecedented challenges, THOR posted record net sales and net income for the fourth fiscal quarter and the full fiscal year, making it the most profitable year in THOR's history. For the fiscal year, we sold over 300,000 units, eclipsed $12 billion in net sales and generated net income attributable to THOR of $11.85 per diluted share, which far exceeds the former record for diluted earnings per share of $8.14 set in fiscal year 2018. These outstanding results are a testament to our team's ability to successfully accelerate production over the course of the fiscal year to meet surging market demand while continuing to maintain quality, navigating continuing supply chain challenges, managing labor, constraints, and ensuring the safety of our workforce. Demand for our RV products remains very robust, continuing to exceed production output. This sustained level of strong demand has led to a continuation of historically low dealer inventory levels and resulted in a new record-high backlog value of $16.86 billion as of July 31, 2021"

2022 Outlook

The Company stated, “"Entering our 2022 fiscal year, we continue to operate in an uncertain time. The rise, fall, and rise again of reported COVID-19 cases around the world, supply chain shortages which change almost weekly, and a very tight labor market across the country, especially in northern Indiana where most of our production facilities are located, all demand that we continue to focus on managing through these challenges to produce and deliver the innovative and high-quality RVs for which we are known. Our team has performed exceedingly well through these challenges, and we remain confident in their ability to continue to do so. While we expect these factors will continue to present challenges in fiscal 2022, our positive long-term outlook for the RV industry and THOR Industries remains unchanged. We believe the recent RVIA most-likely estimate of approximately 577,200 unit wholesale shipments in calendar 2021 and its forecast of a 4.0% increase in calendar 2022 wholesale shipments over calendar 2021 shipments are reasonable."

THO Opportunistic Price Levels

Using the rifle charts on the weekly and daily time frames provides a broader view of the landscape for THO stock. The weekly rifle chart abruptly reversed after peaking at $129.00 and managed to sell off towards the $99.52 Fibonacci (fib) level. The weekly rifle chart fell so sharply that the 5-period moving average is just starting to cross down at $113.01. The weekly stochastic has crossed back down off the 60-band. The weekly lower Bollinger Bands (BBs) sit at the $96.10 level. The daily rifle chart broke down on the market structure high (MSH) trigger when shares fell below $121.80. The daily market structure low (MSL) buy triggers a breakout through $102.99. The daily 5-period MA is stalling at $102.53 with 15-period MA still falling at the $106.97 fib. The daily stochastic crossed up to test the 10-band. A daily pup breakdown or a channel tightening towards the daily 15-period MA will eventually form. Prudent investors can watch for opportunistic pullbacks at the $99.53 fib, $97.38 fib, $94.62 fib, $92.27 fib, $89.20 fib, and the $85.26 fib level. Upside trajectories range from the $117.93 fib up towards the $137.07 fib level.