Thor RV

Thor Industries (THO) reports quarterly earnings after-hours. Analysts expect revenue of $1.93 billion and eps of $1.79. The revenue estimate implies 21% growth Y/Y. Investors should focus on the following keys items during the quarter.

Is Organic Growth Sustainable?

Thor manufactures recreational vehicles (“RVs”) sold to independent dealers throughout the U.S. and Canada. Towables cost an average of around $24 thousand, while motorized RVs cost over $80 thousand. The segment has been growing at a fever pitch, and has shown no signs of letting up. According to the company U.S. and Canada retail unit registrations for the entire RV industry were 184,795 through the first nine months of 2017; that was up about 38% Y/Y. RVs appeal to luxury buyers and also to middle-aged consumers; consumers between the ages of 55 and 74 have been growing by double-digits, providing a boon to RV sales.

Last quarter the company’s total revenue grew 31% Y/Y. Towables were up 34% and Motorized vehicles grew by 23%. In the past the company’s top line was driven by acquisitions, but last quarter’s results were organic. Top line growth of over 20% this quarter would still be nothing to scoff at. As the top line continues to grow and Thor add scale it could be difficult for Thor to maintain double-digit revenue growth.

What Is The Backlog Telling Us?

It is really difficult to nitpick with this company. It has delivered out-sized growth and earnings for several quarters now. Unit growth and pricing have been solid. While revenue was robust last quarter the average selling price also rose by 1% Y/Y. However, I have always suspected that a slow down in revenue growth would be the death knell for Thor. Predicting that slow down has been a lesson in futility.

The company’s backlog of $3.6 billion was up over 70% Y/Y and represents about 160% of quarterly revenue. The company will likely meet expectations this quarter and have a sizeable share of next quarter’s revenue already included in its backlog. The stock is up over 20% Y/Y. The the only thing I envision slowing Thor would be a pullback in the broader markets or a crack in the RV industry’s overall sales.

Conclusion

This will be another solid quarter for THO. The melt up in stocks could be coming to an end after the Fed takes liquidity out of the financial system and/or implements multiple rate hikes. It could slow momentum in the stock. I rate THO a hold into earnings.

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