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Why Is Thor Industries (THO) Down 13.4% Since Last Earnings Report?

Zacks Equity Research
·4-min read

A month has gone by since the last earnings report for Thor Industries (THO). Shares have lost about 13.4% in that time frame, underperforming 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 its most recent earnings report in order to get a better handle on the important drivers.

Thor's Q2 Earnings Miss Estimates, Revenues Shrink Y/Y

Thor posted adjusted earnings for second quarter 2023 of 50 cents per share, which lagged the Zacks Consensus Estimate of $1.10 per share. This underperformance can be largely attributed to lower-than-anticipated revenues from the North American Towable RVs and North American Motorized RVs segments.

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The bottom line declined massively by 89.5% from the year-ago profit of $4.79 per share. The company registered revenues of $2,347 million for the quarter under review, missing the Zacks Consensus Estimate of $2,531 million. The top line also declined 39.4% year over year.

Segmental Results

North American Towable RVs: Revenues from the segment came in at $830 million, down 58.2% year over year due to a decrease in unit shipments resulting from soft dealer and consumer demand. The top line also missed the Zacks Consensus Estimate of $1,120 million.

Gross profit totaled $52.9 million, declining 86% year over year. The pretax loss totaled $7,119 million, down from $275.9 million recorded in the year-ago period amid lower gross profit margins. The unit’s total backlog was $1.15 billion at quarter-end, down sharply from $10.4 billion as of Jan 31, 2022.

North American Motorized RVs: Revenues from the segment totaled $738.6 million, which fell 24.4% year over year, owing to a decrease in unit shipments. The top line also lagged the consensus mark of $1,040 million. Gross profit totaled $107.2 million, dwindling 31.4% year over year. Consequently, pretax profit came in at $61.5 million, declining 40.8% from the year-ago period. The segment’s backlog was $1.85 billion, down from $4.23 billion as of Jan 31, 2022.

European RVs: Revenues from the segment came in at $647 million, down 10.6% from the year-ago period. However, the top line outpaced the consensus mark of $547 million. Gross profit of $91.4 million, rising 1.4% year over year. The segment reported a pretax income of $12 million, higher than the year-ago level of $9.6 million. The backlog of the segment was $3,055 million, reflecting a rise from $3,051 million recorded on Jan 31, 2022.

Financials

As of Jan 31, 2023, Thor had cash and cash equivalents of $281.6 million and long-term debt of $1,758.5 million. During the second quarter of 2023, THO repurchased $25.4 million of common stock.

Revised Guidance for 2023

Thor revised its full-year guidance for fiscal 2023. Thor now projects its full year consolidated net sales in the range of $10.5-$11.5 billion, down from the range of $11.5-$12.5 billion estimated during the first quarter of 2023.  The consolidated gross profit margin is now expected to be in the range of 13.4-14.2%, down from the range of 14.2-14.9%. Diluted earnings per share are now expected to be in the range of $5.50-$6.50, down from previously projected range of $7.40-$8.70.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

The consensus estimate has shifted -35.34% due to these changes.

VGM Scores

Currently, Thor Industries has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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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Zacks Investment Research