1 big question before Thor Industries earnings report
Thor industries‘ (NYSE: THO) the share price had climbed to 60% in 2021 before the returns evaporated in recent months. Now, the RV specialist’s shares are lagging the market as it heads to its FY2022 first quarter earnings report on Wednesday, December 8.
The motorhome giant will inform investors about sales and earnings trends, but the bigger question ahead of the announcement is how much Thor and his peers like Winnebago (NYSE: WGO) today meet the historic challenges of supply and inventory.
Success on this point could set Thor for a fantastic 2022, as he meets existing dealer orders at rising prices. Stumbles, on the other hand, would put pressure on growth or expose the company to significant write-downs in a slowing market.
Image source: Getty Images.
The good news is that investors are likely to see more evidence of strong sales momentum. Thor said in September that there was no sign of slowing demand on the books. This strong demand was met with unusually low inventory at dealerships to create a record backlog of around $ 17 billion.
Of course, this backlog simply represents orders that could be canceled. But it’s still great news for the company to see an order book that exceeds the sales of the previous year. “Demand for our motorhome products remains very strong,” CEO Bob Martin told investors in late September.
The cloudy part of the image concerns the offer. Thor has said he cannot produce enough RVs by the end of fiscal 2021, and those issues may have increased as supply chain issues have worsened in recent months.
Ideally, Thor’s manufacturing network has increased its volume enough to help dealerships increase their inventory levels. If the business has struggled, on the other hand, investors could see another significant increase in the company’s backlog, even though sales were limited in the current quarter. A large backlog is usually great news, but Thor will have to show that he can start turning more of those likely sales into actual sales.
The New Perspective
Investors will also receive a key update on management’s growth forecast now that fiscal 2022 is well advanced. In September, Thor cited several challenges for the near-term outlook, including a tight job market and supply chain issues. The company should, however, handle these issues without too much disruption, she predicted. We’ll find out if Thor is still on that bullish growth and earnings path this week.
Executives could also explain if they still see the RV industry growing by around 4% in 2022, which would likely fuel another record year of profits and sales for Thor. But again, this bullish reading depends on the company’s ability to increase production and take advantage of strong demand today. These demand trends can change quickly. It is a consumer discretionary industry, after all.
This factor helps explain why Thor and his peers are working hard to deliver RVs and towable RV products to dealerships now rather than just taking orders for future deliveries. This week’s report will show how well Thor handles this challenge.
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Demitri Kalogeropoulos has no position in the mentioned stocks. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
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