Thor (THO) Stock Up on Q4 Earnings Beat, Margin Improves Y/Y

Thor Industries, Inc.’s THO shares grew 1.5% on Sep 28, after the company reported solid fourth-quarter fiscal 2020 results. Both the top and bottom lines not only surpassed the Zacks Consensus Estimate but also grew on a year-over-year basis.

Post fiscal third quarter, it witnessed an increase in retail demand that drove historically low inventories and record high backlog by fiscal 2020-end. Thor remains confident for long as well as short-to-medium-term outlook

Earnings, Revenues & Margin Discussion

Thor reported adjusted earnings of $2.14 per share, which surpassed the consensus estimate of $1.38 by 55.1%. Also, the metric rose 28.1% year over year backed by strong revenues and gross margin.

Thor Industries, Inc. Price, Consensus and EPS Surprise

Thor Industries, Inc. price-consensus-eps-surprise-chart | Thor Industries, Inc. Quote

Net sales of $2.32 billion topped the consensus mark of $2.31 billion by 0.7%. On a year-over-year basis, the top line increased 0.5%, mainly backed by solid European RV segment.

Gross margin came in at 14.9%, which improved 50 basis points (bps) from the year-ago level. This was mainly driven by reduced warranty costs and overhead savings from cost-reduction measures in response to the COVID-19 outbreak, partially offset by an increase in material costs, primarily due to product mix.

Segmental Results

North American Towable RVs’ sales of $1.18 billion grew 1.7% from the prior-year period. The segment’s gross margin rose 60 bps to 16.6% from a year ago, driven by lower material and warranty costs as a percentage of North American towable net sales.

At fiscal fourth quarter-end, backlog in the segment totaled $2.76 billion, up almost 300% from $693.2 million reported a year ago.

Sales in the North American Motorized RVs fell 5.4% year over year to $366.5 million due to lower unit sales and a shift in product mix. Nonetheless, gross margin improved a notable 250 bps on a year-over-year basis to 12.1% owing to the above-mentioned tailwinds.

Backlog in the segment increased 216.4% to $1.45 billion from $458.8 million recorded a year earlier.

The European RVs segment’s sales were $739.9 million for the quarter, up 2.8% year over year. The upside was driven by a change in product mix and selective selling price increases. Gross margin for the segment totaled 13.2%, down 20 bps from a year ago.

The segment’s backlog was $1.53 billion as of Jul 31, 2020, reflecting an increase of 79% from the year-ago period.

Financial Position

As of Jul 31, 2020, Thor had cash and cash equivalents of $541.4 million, up from $451.3 million on Jul 31, 2019. The company had a long-term debt of $1.65 billion at fiscal fourth quarter-end compared with $1.89 billion at fiscal 2019-end.

Fiscal 2020 Highlights

For the year, the company generated earnings of $4.02 per share, which improved an impressive 62.8% year over year. Net sales were $8.17 billion, up 3.9% from $7.86 billion reported a year ago. The increase is primarily attributable to incremental European net sales, partially offset by a decrease in North American net sales due to the impact of the COVID-19 pandemic.

Fiscal 2021 Guidance

Thor is optimistic about fiscal 2021 as it is witnessing considerable interest in the RV lifestyle from first-time buyers and strength in the upgrade buyer. However, it is experiencing supply chain challenges and constraints as suppliers are ramping up to meet the unexpectedly high level of demand from manufacturers.

Bob Martin, president and CEO of Thor said “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.”

Zacks Rank

Thor — which shares space with Skyline Champion Corp. SKY, Winnebago Industries, Inc. WGO and Cavco Industries, Inc. CVCO in the Zacks Building Products - Mobile Homes and RV Builders industry — currently carries a Zacks Rank #2 (Buy).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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