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Bull of the Day: Thor Industries (THO)

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Thor Industries, Inc. (THO - Free Report) is riding the demand for RVs and towables to new records. This Zacks Rank #1 (Strong Buy) just posted its best quarterly revenue and profitability in the Company's history.

Thor is the world's largest RV manufacturer in the world. Headquartered in Indiana, it makes RVs and towables under the popular brand names of Airstream and Jayco, among others.

Another Big Beat in Fiscal Q1

On Nov 27, Thor reported its fiscal first quarter results and crushed the Zacks Consensus Estimate by 63 cents, or 35%. Earnings were $2.43 versus the consensus of just $1.80.

It was the third straight beat in a row.

Revenue was an all time quarterly record of $2.23 billion as gross profit margins rose to 14.9% from 13.9% a year ago.

Towable RV sales jumped 33.7% to $1.62 billion from $1.2 billion a year ago driven by strong demand for more affordably-priced travel trailers.

Towable backlog jumped 75.2% to $2.46 billion from $1.4 billion a year ago due to strong momentum in the industry for its travel trailers in advance of the calendar 2018 selling season.

On the motorized RV side, first quarter sales gained 22.8% to $566.6 million from $461.5 million a year ago. It saw growth in the moderately-priced Class A and Class C motorhomes, particularly in Class C, which are smaller motorhomes. Both are in demand from its dealers and consumers.

The motorized RV backlog jumped 59.1% to $1.12 billion from $706.4 billion in the year ago period due to continued robust demand for its smaller gas Class A and Class C motorhomes.

Will the Good Times Last in 2018?

This has been a record time for the RV makers as it has seen growth due to the Baby Boomers retiring, with their stock portfolios at record highs, along with demand for the towables from Generation X and Millennials who are buying to travel into the national and state parks.

The strong stock and housing markets have likely helped towable sales as well.

Industry demand remains "exceedingly strong." Thor has been adding production to keep up with demand.

Two flies in the ointment, however, are the tight labor market in Northern Indiana. In Elkhart County, the unemployment rate is under 2.5%. Thor has been hiring from nearby counties but workers are hard to find there as well.

That could mean it will have to increase wages to find the necessary labor.

Additionally, it is seeing some inflationary price increases on certain raw material and commodity-based components.

Estimates Jump for F2018 and F2019

The analysts, however, remain extremely bullish.

3 estimates were raised after the report for fiscal 2018 pushing the Zacks Consensus Estimate up to $8.71 from $8.14. That is earnings growth of 22.9% as the company made $7.09 in fiscal 2017.

Additionally, 3 estimates were also raised for fiscal 2019, which is still a year out. The Zacks Consensus Estimate has jumped to $9.50 from $8.83 in the last week which is another 9% earnings growth.

Shares at All Time High

After the strong earnings report, shares soared to new all time highs.

However, they're not that expensive given that the earnings are also on the rise. Thor trades with a forward P/E of just 17.8, which is below the average of the S&P 500 which is trading at 20x.

In addition, it continued to reduce the outstanding balance under its credit facility, paying down $55 million during the quarter. It had $90 million outstanding as of Oct 31, 2017.

It also paid an additional $10 million on the outstanding debt balance subsequent to the end of the quarter, so the balance is currently just $80 million as of Nov 27, 2017.

Shareholders are also rewarded with a dividend, currently yielding 1.1%.

With the economy strong and the stock market at new highs, Thor looks on track for another record year in Fiscal 2018.

For investors looking for a way to play the strengthening consumer, Thor Industries is one investors should keep on their short list.

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