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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 in 2020, the stock traded sideways over the summer after pulling back from highs. However, a recent earnings report helped bring investors back into the stock. Now, the bulls are looking for all-time highs once again.  

About the Company

Thor is headquartered in Elkhart, Indiana and employs over 22,000 people. The company was founded in 1980 and sells travel trailers, motorhomes, caravans, urban vehicles and more.

THO is valued at $6.8 billion and has a Forward PE of 9. The company holds a Zacks Style Score of “A” in Momentum and “B” Value. The stock also pays a 1.3% dividend.

Travel Has Changed

The COVID-19 shutdowns started a movement for consumers to look at different ways to vacation and travel. With hotels closed and airport travel inconvenient, people looked to the old fashion camper as an alternative.

Demand for RVs went through the roof, which caused a massive backlog for companies like Thor and Winnebago.

When the vaccines came out, there was the thought that America would be opening up and travel would return to normal. However, the demand for campers, motorhomes and other recreational vehicles never subsided. Earnings and order backlogs from the manufacturers of these products shows us that domestic travel has changed for good.

Earnings Beat

Thor investors are used to beating on EPS, with the recent quarter marking sixth straight earnings surprise to the upside. The company posted a 42% beat on the bottom line, and saw revenues of $3.59B v $3.33B expected.

Thor Industries, Inc. Price and EPS Surprise

Thor Industries, Inc. Price and EPS Surprise

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


The order backlog is still huge, up 190% year over year. Gross profit margin was also up big from last year and the company said that demand for their RV products remains robust.  

Management was very positive on the call, making the following comments:

"THOR is carrying great momentum into fiscal year 2022, supported by a number of positive factors. Interest from new RV buyers and order activity continues to be robust across each of our business segments. We have record backlogs supported by North American dealer inventory levels that are 9% lower than the already historically low levels from a year ago and 44% lower than they were two years ago. Dealers remain confident in the long-term outlook for the RV industry and continue to invest in growing their businesses as the industry sees continued buying interest from both the first-time and repeat RV buyers." 

Thor added that that despite the challenging operating environment, the team has overcome the supply chain constraints. They look to grow the dividend, fund strategic opportunities and repurchase shares.

Estimates Rising

The quarter has opened eyes among analysts, which have started to lift estimates drastically. For the current year, analyst have raised estimates from $11.36 to $13.69, a hike of 20%. For the next year, we see an 13% jump, from $12.07 to $13.65.

Analyst are talking price targets higher. Wedbush raised their price target to $140 from $126 and BMO has their target at $166.

The Technical Take

The move lower over the summer broke some moving averages and threatened the $100 level. However, a 61.8% Fibonacci support level just above that $100 mark held up well. With the stock back above moving averages, the chart looks technically bullish.

The next resistance level will be the $140 market, an area where the bears took over back in May. If the bulls can push over $132, we would have $178 Fibonacci targets (161.8%).

In Summary

The RVs are still seeing a lot of demand and the backlog for campers is massive. The company has overcome challenges and proved that the supply chain issues have not gotten in the way of exceeding their numbers.

Look for the momentum to continue into the next year and for things to improve as supply chains get back to normal.

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