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Bull of the Day: Thor Industries (THO)

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Thor Industries (THO - Free Report) is a Zacks Rank #1 (Strong Buy) that makes a wide range of recreational vehicles (RVs). The company manufactures in Indiana and Ohio and sells its products through independent dealers in the U.S. and Canada.  

After doubling from the COVID lows last year, the stock has struggled as of late. Investors seem to be concerned that the momentum from last year has faded and the stock is off over 30% from highs.

Recent earnings were solid and the company showed a huge back log. Investors should be watching for a bounce shortly as the stock tests old support levels.

About the Company

Thor is headquartered in Elkhart, Indiana and employs over 22,000 people. The company was founded in 1980 and sells popular brands like Four Winds, Majestic, Windsport and more.   

THO is valued at $6 billion and has a Forward PE of 10. The company holds a Zacks Style Score of “A” in Momentum and “B” Value. Thor also pays a 1.5% dividend.

Travel Has Changed

There was a lot of fear surrounding travel at the height of the pandemic. Because the U.S. had one of the highest cases counts, some countries issued quarantine rules for travelers. This wasn’t appealing for someone on vacation so we saw a big uptick in domestic travel. And since all the hotels were closed, the demand for RV’s and the desire to camp increased.

While America has opened up, the demand for camping is still there as we head through the summer months. We saw that when Thor reported earnings and the company showed a massive backlog.

Earnings Beat

Before we get to that demand, lets talk about the specifics within the latest earnings report. On June 8th, the company reported earnings beat of 39%. Revenues came in at $3.46 billion v the $3.02 billion expected. Gross profit margin came in at 14.6% or +240bps year over year.

The order backlog is impressive, with $14B on the books, up 5.5X year over year. This is great to see such strong demand, but its not a good problem to have as its sales that aren’t being delivered until the company can ramp production.

That being said, the demand factor should be a tailwind. CEO David Butt said the following on the call:

"We continue to see robust demand for our RVs and see no signs of demand slowing even as the economy recovers from the pandemic. Demand for our products continues to grow at both the retail and wholesale levels”

Thor is focused on increasing capacity and maximizing production, but supply chain issues are hampering their efforts. This is part of the reason for the stock slide.

Thor Industries, Inc. Price and EPS Surprise

Thor Industries, Inc. Price and EPS Surprise

Thor Industries, Inc. price-eps-surprise | Thor Industries, Inc. Quote


This change in the RV market took the stock to highs not seen since 2017. However, for THO to return back to those levels this year, the next quarters earnings need to give investors’ confidence that the back log can be met.

Estimates Rising

Because the quarter was so impressive, analysts were forced to take numbers higher. For the current year, analyst have raised estimates from $9.55 to $10.38, a hike of 9%. For the next year, we see an 8 % hike, from $10.31 to $11.19,

The Technical Take

The recent move lower has done a lot of technical damage. The 50-day broke in early May and the stock had pretty much gone straight down. More recently, the 200-day has given way to selling and the stock is now threatening the $100 mark.

The $90-100 level should offer the bulls a great buying opportunity. Some stops will be taken out under $100 and the $90-95 area will offer solid support as it did late last year. Expect the 200-day to be challenged by the bulls and then short-term traders can determine if a bottom has been put in.

In Summary

Campers are still in demand. If you go on the road, you’ll see them. If you try to reserve a campsite, good luck, they are all booked! Traders have been recently cautious on higher gas prices, supply chain issues and technical failures. However, this is giving a great opportunity for new investors to come in for the long-term.

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