who was surprised Toll Industries (NYSE: THO) FQ2 Miss doesn’t pay attention to the story. Not only is this cliff approaching, data and guidance from OEMs and retailers show new RV business will shrink by at least 50% this year. RVIA shows that shipments fell by more than 30% in December 2022, before accelerating to -62% in January 2023, and the trend is likely to continue.
The mitigating factor is that this setback is from a record high and we expect a normalization in the industry by the end of the year. As for Thor Industries, this stock is a bargain (like all Camp/RV stocks today) and pays a safe dividend. Price action may show downward pressure in the short term, but the downside is limited. The market is trading just above the strong support zone, which should keep the stock flat until normal conditions and growth return.
Toll Industries FQ2: Could have been worse
Thor Industries’ FQ2 results could have been far worse given the trends in the RVIA data, LCI Industries (NYSE: LCII), has become an industry pioneer. LCI Industries manufactures his RV components and claims an average component sales of $6090 per his completed RV. His OEM sales for the same period were reportedly down 40%, which is consistent with his 39.4% decline reported by Thor. Toll missed the consensus mark, a real problem for the stock, and margins and guidance were also weak.
Thor Industries’ gross margin contracted 531 basis points on a gross level due to significant deleveraging compared to last year. Similarly, selling, general and administrative expenses decreased significantly from last year due to internal efficiencies, but increased as a percentage of revenue due to deleveraging. That puts GAAP EPS at $0.50, putting him $0.63 below Marketbeat.com’s consensus, undermining guidance.
The company cut its revenue and earnings guidance to low double digits, well below consensus expectations. As a result, business is stable and dividends are safe, even though it has slipped from the peak of the pandemic. The company paid about 37% of its guidance for the fiscal year at the lower end of the new range, leaving plenty of room and room to grow.
“While near-term demand will continue to be impacted by macroeconomic conditions, we believe the recent softening in demand is temporary. We continue to be encouraged as we continue to experience a strong spring retail show season nationwide with high visitor numbers and strong retail activity, while digital traffic across RV-related sites is at pre-pandemic levels. It’s far superior,” said Bob Martin, CEO of Thor Industries.
Technical Outlook: Toll Industries Leads Fall in RV Shares
Toll Industries drops more than 5.0% on earnings report, has competitors Winnebago (NYSE: WGO) down too. Winnebago reports later this month and expects a weaker report than current consensus numbers have priced in. With respect to Toll Industries, the stock is about to retest the support near $83.150-day moving average is currently acting as support and may be able to sustain the market. If so, this stock could bounce sideways and stay in the trading range. If not, Thor Industries could break below $84 and retest the support near $66.
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