A raincloud still lingers over Thor Industries (THO, Financial) after the world's largest RV manufacturer lowered its FY24 (Jul) guidance for the second consecutive quarter in Q3 (Apr) despite outperforming earnings and revenue estimates. The RV industry has been particularly hurt by elevated interest rates, increased financing costs, and persistent inflation, raising the already-high cost of ownership, including fuel, parts, and maintenance.
THO and its rival Winnebago (WGO, Financial) align their RV shipment forecasts with projections from the RV Industry Association (RVIA), which has consistently lowered its 2024 estimates since December. The RVIA recently lowered its 2024 forecast to 328,900-359,100 units, a 7% decline from six months ago. While the RVIA's 2024 estimate represents an improvement from around 313K units shipped in 2023, there is still considerable ground to make up from the 493K units shipped in 2022 and 600K in 2021.
However, early forecasts for 2025 RV shipments signal a nearly 14% improvement over 2024 estimates. Despite THO's downward trend since early March, shares are still up around 35% from 2022 lows, indicating that the market retains some optimism for significant demand uptick next year, betting on the Federal Reserve cutting rates and further disinflation rekindling consumer demand.
- THO's Q3 headline numbers reflect the challenging macroeconomic landscape. The company posted a 5% drop in EPS yr/yr to $2.13, following a 65% plunge in the year-ago period. Revenue contracted by 4% to $2.8 billion despite lapping a 37% decline from the year-ago quarter.
- Weaknesses persisted across North America and Europe during the quarter, though to a lesser degree overseas. Retail registrations in Europe were relatively strong versus North America, inching 6.4% higher yr/yr during the first quarter of 2024. Supply-chain issues are mostly behind THO in Europe, and dealer inventory levels of its motorized RV brand have been restocked to normalized levels ahead of the peak selling season.
- Given the ongoing slowdown in retail activity, THO stayed cautious about its final quarter of FY24, reducing its annual EPS and revenue guidance to $4.50-4.75 from $5.00-5.50 and $9.8-10.1 billion from $10.0-10.5 billion, respectively. THO also expressed caution about FY25, citing uncertainty surrounding relief from macroeconomic inhibitors.
Given how fluid the RVIA's forecasts have been over the past several quarters, its early 2025 outlook should be taken with a grain of salt. While THO and WGO remain bullish on the long-term health of the RV industry, citing increased demand for the camping lifestyle since the pandemic, near-term challenges like interest rates and cumulative inflation can keep volatility elevated.
