Winnebago Industries (WGO Quick QuoteWGO - Free Report) , the country’s leading producer of recreational vehicles, is bumping up against the obstacle of late business cycle economics, as consumers reduce discretionary spending and tighten budgets. In addition to a Zacks Rank #5 (Strong Sell) rating, it still has a historically elevated valuation, possibly not pricing in a further slowdown in consumer spending.

Because of these developments, I think investors should look for other opportunities.

Earnings Estimates

Analysts have unanimously lowered the expectation for Winnebago Industries earnings, giving it the lowest Zacks Ranks.

Current quarter earnings have declined by -12% and are forecast to fall -40% YoY to $1.25 per share. FY24 earnings have been revised lower by -5.6% and are projected to decrease by -14.3% YoY to $6.57 per share.

Image Source: Zacks Investment Research

Technical Perspective

WGO stock has been trading in a wide range all year and was just denied by the upper level of resistance. I think it is likely that the lower level of support will be retested at some point in early 2024, making this stock one investors should avoid.

Image Source: TradingView

Valuation

Winnebago Industries is trading at a one year forward earnings multiple of 10.5x, which is below the industry average and above its five-year median of 9x. The company has also been increasing the share count over the last several years, and the shares outstanding jumped 11% in just the last year.

Image Source: Zacks Investment Research

Bottom Line

Although Winnebago Industries is an industry leading company that likely has a positive long-term future, the near-term prospects for the stocks are not good. Investors should explore other industries as the market and economy digest the shifting environment.