Winnebago Trades Higher After Triple-Digit Revenue Growth

Winnebago Industries NYSE: WGO saw strong sales and earnings growth during the pandemic, as Americans hit the road to enjoy the outdoors, away from cities.

As Covid restrictions eased ahead of the summer getaway season, that growth continued in the most recent quarter. 

Early Wednesday, the company reported third-quarter earnings per share of $2.16, up from a loss of $0.26 per share in the year-ago quarter, when lockdowns began. Revenue grew 139%, to $960.7 million. 

In the earnings release, company CEO Michael Happe said, “We remain focused on working with our suppliers to sustain strong levels of production and with our dealer network to replenish their inventories in the face of record backlog.”

Happe also noted that the company is striving to “meet the persistent, elevated demand we anticipate in quarters to come, driven by the secular and ongoing growth in outdoor lifestyle products and a positive change in consumer preferences for leisure and family activities.”

Revenue for the towable segment was $555.7 million in the quarter, up 194.2% over the prior-year period and 26.5% sequentially, driven by heightened consumer demand for the company’s Grand Design and Winnebago branded products.

Revenue for the motorhome segment came in at $385.3 million, up 89.2% from the year-ago quarter, spurred by continued strong consumer demand for both Winnebago and Newmar branded motorhomes.

In the earnings call with analysts, Happe acknowledged supply-chain challenges, a familiar refrain in earnings reports from companies in many industries and sectors.

“Our manufacturing processes are running daily at peak levels as the supply chain allows,” he said. 

He added that the company is “executing against an increasingly robust order backlog to replenish, as quickly as possible, inventories for our dealer partners.”

Part of the backlog is due to RV production shutting down, industry-wide, in the early days of the pandemic. When production kicked in again in May 2020, demand for RVs was skyrocketing, at the same time manufacturers faced challenges due to safety protocols for their workers, as well as supply-chain bottlenecks. 

“A year ago, when RV plants shut down for nearly two months, who would have thought we would be talking about record-breaking shipments less than a year later?” said Jeff Rutherford, chairman of the RV Industry Association, in an April article the group published. 

“The fact that 2021 is projected to be the best year ever for RV shipments speaks to the strengths of our industry and the ability for RV companies to overcome the challenges presented by the COVID-19 pandemic, as well as the incredible appeal of the RV lifestyle,” Rutherford added. 

Analysts expect Winnebago to earn $7.34 per share this year, an increase of 183%. However, that’s seen slowing slightly next year, to $7.27 per share. 

Shares climbed 1.06% mid-session Wednesday, to $67.24. That gain followed upside trade on Monday and Tuesday, as well. Volume was heavier than normal all three days, a sign that big shareholders were loading up.

The stock has been consolidating below its March 17 high of $87.53. Late last week, as the broader market sold off, Winnebago gapped below its 200-day moving average. It regained that line in Tuesday’s session and continued to trade above that key moving average Wednesday. 

So far, the stock is finding support well above its previous structure low of $44.33 from November 10. 

It’s possible the stock may form a somewhat sloppy double bottom pattern, with a buy point above $85.15. At this juncture, that may offer an early entry point, although you’d like to see heavy trading volume confirm the move if the stock surpasses that point. 

Even if you have confidence in the ongoing demand for RVs and for Winnebago’s products, in particular, the stock’s chart tells you that it’s premature for a buy. It’s best to wait for the big money to send the price higher before you opt to jump in for the ride.