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Thor Industries (THO) Down 0.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research
·4-min read

It has been about a month since the last earnings report for Thor Industries (THO). Shares have lost about 0.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Thor Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Thor Q1 Earnings & Sales Fall Y/Y

Thor posted adjusted earnings of $2.53 per share or first-quarter fiscal 2023 (ended Oct 31, 2022), which surpassed the Zacks Consensus Estimate of $2.09. This outperformance can be largely attributed to higher-than-anticipated revenues from North American Motorized and European RVs segments. This marked the 11th straight earnings beat for Thor. The bottom line, however, declined from the year-ago profit of $4.34 per share. The company registered revenues of $3,108.1 million for the quarter under review, missing the Zacks Consensus Estimate of $3,117 million. The top line also fell 21.5% year over year.

Segmental Results

North American Towable RVs: Revenues from the segment came in at $1,317.8 million, plunging 41.2% year over year on the back of a decline in shipments. The top line also lagged the Zacks Consensus Estimate of $1,760 million. Gross profit totaled $195.8 million, down 52.1% year over year. Pretax profit totaled $111 million, down from $266.3 million recorded in the year-ago period amid lower gross profit margins and reduced sales.  At quarter-end, the unit’s total backlog was $1.57 billion, declining sharply from $10.4 billion as of Oct 31, 2021.

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North American Motorized RVs: Revenues from the segment totaled $1,123.5 million, which rose 21.5% year over year, thanks to higher unit sales and the Tiffin Group buyout benefits. The top line also outpaced the consensus mark of $1,036 million. Gross profit totaled $185.7 million, up 23.9% year over year. Consequently, pretax profit came in at $124.3 million, jumping from $88.9 million recorded in the year-ago period, thanks to higher sales and gross profit margins. Backlog in the segment was $2.86 billion, down from $4.27 billion as of Oct 31, 2021.

European RVs: Revenues from the segment came in at $504.3 million, down 20.3% from the year-ago period. The top line, however, beat the consensus mark of $450 million. Gross profit of $68.8 million inched up 2.1% year over year.  The segment incurred a pretax loss of $6.4 million, narrower than the year-ago level of $18 million. The backlog of the segment was $2.98 billion, reflecting a drop from $3.35 billion recorded on Oct 31, 2021.

Financials

As of Oct 31, 2022, Thor had cash and cash equivalents of $291.7 million and long-term debt of $1,714.6 million. During the fiscal first quarter, the company hiked its quarterly payout by 5%, marking the 13th straight year of dividend increase. During the quarter under review, Thor bought back 338,733 shares worth $25.4 million, at an average price of $75.01.

Guidance

Thor expects fiscal 2023 net sales in the band of $11.5-$12.5 billion, implying a decline from $16.31 billion recorded in fiscal 2022. The gross profit margin is expected in the range of 14.2-14.9%. Earnings per share are envisioned to be between $7.40 and $8.70, suggesting a sharp contraction from $20.59 in fiscal 2022.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -46.83% due to these changes.

VGM Scores

At this time, Thor Industries has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Thor Industries has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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