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Bull of the Day: Winnebago Industries (WGO)

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Winnebago Industries (WGO - Free Report) is a Zacks Rank #1 (Strong Buy) that is a leading producer of recreational vehicles (RVs). The stock has seen some bullish action since the pandemic as people change their travel habits and buy RVs. Recent earnings have given investors more reasons to buy the stock and with COVID-19 still around in 2021, there seems to be plenty of demand coming.

More About WGO

The company was founded in 1958 and is headquartered in Forest City, Iowa. Winnebago employs over 5,500 people and sell its products through independent dealers in the United States, Canada and internationally.

The company is valued at $2 billion and pays a 0.78% dividend. It operates in six segments that focus on towable products, motorhomes, boats and specialty vehicles.

Travel Has Changed

The appeal of camping and other outdoor activities has increased due to COVID-19. Consumers are changing their travel habits from international to domestic and one of the best ways to do this is by camper, RV and even boat.   

Hotels and planes still aren’t appealing to people yet and will likely be avoided until the vaccine gets the world to herd immunity. Because this seems to be taking longer than expected, WGO should have continued strength well into 2021.

Earnings Beat

Last month, the company reported a 64% EPS surprised to the upside. Q1 came in at $1.69 v the $1.03 expected, while revenues came in at $793.1M v the $742M expected. Gross margins, motor home deliveries, backlog, and revenue were all up double-digit percentages year over year.

CEO Michael J. Happe had some comments on what’s to come:

“Throughout the remainder of Fiscal Year 2021, Winnebago Industries will be focused on building upon our market momentum, and doing good in the social arena as well. We are confident that the favorable industry dynamics in the RV and marine markets and the unique appeal of our innovative products will continue to drive market share gains and strong financial results.

Estimates Rising

The strong quarter caused analysts to take numbers higher across all-time frames. For next quarter, estimates have from $1.07 to $1.46 over the last 30 days, a hike of 36%. For the current year, we see a 27% jump in estimates for that same time frame.

The Technical Take

Along with every other stock back in March, WGO crashed under $20 a share. From there, it grinded all the way back to $72.65 over the summer as investors realized this new consumer trend of domestic travel.

The stock saw some weakness and traded to the hallway back mark from those March lows. Then WGO spiked on earnings, but has since come back into the 21-day MA at $61.

The stock has support around the $55 level, where the 50 and 200 moving averages reside.

In Summary

The way Americans travel has changed due to the pandemic. While this won’t last forever, the current situation makes WGO a stock to own into 2021. The stock looks to hit all-time highs, but investors should keep careful eye on earnings as we get past the pandemic in the back half of the year.

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