Supply Chain Disruptions Are No Problem For Winnebago
We were expecting great things from Winnebago (NYSE: WGO) in its calendar Q3 report and great things are what we got. The company beat on the top and bottom-line driven by strong demand across all of its and markets and shares are moving higher because of it. While the global supply chain disruptions and rising inflation had an impact on the company's operations results are impressive and point to continued top and bottom-line growth in the coming quarters. If anything, based on the growing backlog, Winnebago’s only limit is in how many RVs it can put on the road.
Winnebago Is Winning The Earnings Game
Winnebago Industries’ fiscal Q4 results are easily the best we've seen this earning cycle. The company reported $1.03 billion in consolidated revenue which is good for a gain of 40.4% over last year, beat the consensus by 670 basis points, and set a company record. The revenue gains were driven by a combination of pricing initiatives to offset rising inflation, high demand, and a favorable mix. On a segment basis, the towable segment grew by 35.3% while the higher-margin motorized segment grew by 48.7%. More importantly, the fundamental environment of high demand, low dealer inventory, and supply chain disruptions is fueling market share gains to the tune of 210 basis points sequentially.
Moving down to the margins, the company reports the same systemic issues as virtually all other businesses today but was able to mitigate them through pricing initiatives, a decreased discounting environment, and cost leverage. The company reported a 150 basis point increase in gross margin and a 480 basis point increase in EBITDA margin that led to a substantial improvement in YoY earnings. On a GAAP basis, the company reported $2.45 to beat the consensus by $0.43 and set a company record. On an adjusted basis, the $2.57 in reported earnings are up 77% from last year, beat the consensus by $0.52, and are also a company record.
The company didn't give any formal guidance but gave a very favorable outlook of its business. The company's backlog increased 12% sequentially and 127% over last year to a record $1.70 billion. This will drive strong results for the next several quarters at least and will be amplified by recent acquisitions. The company recently purchased Barletta Boat Company strengthening its move into the boating industry.
Winnebago Is A Steal At These Prices
Winnebago’s dividend is incredibly safe but its valuation is not. Trading at only 9X its earnings and delivering results such as with the Q4 report, we see a major multiple expansion in the works. In our view, this stock could be trading at twice its current valuation and would still be a value to the broad market. Regardless, the 1% dividend payout is less than 10% of its consensus earnings estimate and the balance sheet is borderline fortress quality so we see a very high likelihood of aggressive dividend increases in the future.
The Technical Outlook: Range-Bound Winnebago Moves Higher
Shares of Winnebago have been range-bound since early spring but may be ready to break out. Price action is moving higher in the wake of the Q4 results and appears to be moving up within the trading range at least. There may be some resistance at or near the $80 level but we would expect that to break down fairly easily. The next major hurdle is near the $85 level and the Pricetarget.com consensus estimate, which may be a little tougher to break. If price action can get above the $85 level and close there, however, we would view that as a very bullish move that would open targets in the range of $105, or nearly 45% upside from current levels.
Companies in This Article:
