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Bear of the Day: Thor Industries (THO)

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Thor Industries, Inc. (THO - Free Report) is seeing a big slowdown in its key North American market. This Zacks Rank #5 (Strong Sell) is expected to see an earnings decline of 40.5% in fiscal 2019.

Thor is the world's leading RV manufacturer with brands such as Airstream and Erwin Hymer Group (EHG).

Another Miss in the Fiscal Third Quarter

On June 10, Thor reported its fiscal third quarter 2019 results and missed on the Zacks Consensus by 9 cents. Earnings were $1.65 versus the consensus of $1.74.

It was the fifth earnings miss in a row.

Sales rose 11.3% to $2.506 billion from $2.251 billion a year ago but only because of the inclusion of $767.5 million in net sales from the new European RV segment which was acquired on Feb 1, 2019.

The North American business saw a significant decline both in Towables and Motorized RV sales.

Towable RV sales were $1.24 billion, down from $1.61 billion a year ago, which was a record for the quarter.

Motorized RV sales also fell year-over-year to $459.2 million, down from $598.5 million, which was a record third quarter, in the prior year.

The industry is in the midst of an independent dealer inventory rationalization which the company expects to continue through the end of fiscal 2019.

It did see North American independent dealer inventory steadily improving, which points to a firmer start for fiscal 2020.

Thor will report its fiscal fourth quarter results on Sep 30, before the market opens, so it will shortly be providing further guidance on its outlook for fiscal 2020.

It continues to believe that demographic trends are in its favor, especially with the Baby Boomers in the midst of retiring and Millennials also wanting to purchase towables to enjoy the outdoors on the weekends and on vacations.

Earnings Estimates Continue to be Cut

It's been a rough year.

4 estimates have been cut for fiscal 2019 in just the last 30 days pushing the Zacks Consensus Estimate down further to $5.09 from $5.24.

That's a decline of 40.5% as the company made $8.55 last fiscal year.

One analyst also cut in the last week, which is a bearish sign heading into the earnings report that is on Sep 30.

The analysts are also bearish on Fiscal 2020, with four cutting in the last month. The F2020 Zacks Consensus Estimate has fallen to $5.79 from $6.38 during that time.

That is a return to earnings growth however, as it's a gain of 13.8%.

Shares Make a Round Trip

Shareholders have been taking it on the chin even though Thor is shareholder friendly and pays a dividend yielding 2.9%.

Shares are down 56.8% over the last 2 years and have made a virtual round trip over the last 5 years.

The company has been paying down its debt. Subsequent to the end of the third quarter, it paid the remaining $60  million outstanding on the ABL facility and made payments of about $155 million on its term loan.

It reduced its overall debt levels by $40 million during the quarter.

Shares are cheap now, with a forward P/E of just 9.3.

But has the North American market stabilized?

It's main competitor, Winnebago Industries, Inc. (WGO - Free Report) , is seeing similar estimate cuts by the analysts and is a Zacks Rank #4 (Sell). However, it's expected to grow earnings by 12% this year.

Investors might want to tune into Thor's fourth quarter results on Sep 30 for more guidance.

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