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Winnebago (WGO) Tanks 30% in a Year: Is it a Good Entry Point?
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Shares of the recreational vehicle (RV) maker Winnebago Industries (WGO - Free Report) have plunged 30% over the past year. A number of factors like chip shortage, scarcity of other RV components, supply chain challenges, high commodity and operational costs and declining demand for the company’s products are hurting the stock performance. But does this 30% decline over the past year make for a buying opportunity? Considering the uncertain near-term macro environment, we believe it's better to wait on the sidelines now.
With the fortunes of the RV industry tied to the economy, Winnebago reported a 17.6% and 41% decline in revenues and earnings, respectively, in the first quarter of fiscal 2023. Demand for the company’s premium RV product lineups continued to normalize in the last reported quarter after registering massive growth in fiscal 2021. Demand particularly cooled off in the Towable segment. The downturn is not expected to end anytime soon.
A rising interest rate environment and economic uncertainty will continue to act as spoilsports. The RV space relies heavily on consumers' affordability. Higher interest rates translate to increasing costs of financing and the question is whether customers would be keen on taking a high-interest rate debt to finance their next RV purchase, especially when the economic scenario is so uncertain. The central banks signaled to keep the interest rates higher for longer through 2023 and no rate cuts till 2024. The FOMC has also lowered its GDP growth projection for 2023 from 1.2% to 0.5%.
Amid this backdrop, the RVIndustry Association forecasts RV shipments in 2023 in the band of 379,200-403,600 units, implying a more than 20% decline from the expected 2022 level of 495,300 units. The glum projections are a result of the fears of economic slowdown triggered by high inflation, rising interest rates and aggravated supply chain snarls. Winnebago expects 2023 results to be affected by broader challenges.
However, it also believes that by fiscal 2025 things will turn around for good, with RV sales picking momentum once again. As such, it sticks to its long-term targets unveiled in November 2022. Winnebago aims for $5.5 billion in net revenues in fiscal 2025. While this instills some confidence for long-term investors, the road ahead looks uncertain as of now given the recessionary fears. As such, it’s better to employ a “wait and see” approach on the stock now.
Two better-ranked players from the broader sector that you can invest in are CarParts.com (PRTS - Free Report) and China Automotive Systems (CAAS - Free Report) . Both these stocks currently sport a Zacks Rank #1.
Based in Torrance, CarParts operates as an online provider of aftermarket auto parts and accessories. The Zacks Consensus Estimate for PRTS’ 2022 earnings and sales implies year-over-year growth of 85% and 13.2%, respectively. The consensus mark for the 2023 bottom line has improved 58.3% over the past 60 days.
China Automotive Systems is a leading supplier of power steering components and systems in China. The Zacks Consensus Estimate for CAAS’ 2022 earnings and sales implies year-over-year growth of 72.2% and 8.3%, respectively. The consensus estimate for CAAS’s current-year earnings has been revised 7 cents upward over the past 30 days.
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Winnebago (WGO) Tanks 30% in a Year: Is it a Good Entry Point?
Shares of the recreational vehicle (RV) maker Winnebago Industries (WGO - Free Report) have plunged 30% over the past year. A number of factors like chip shortage, scarcity of other RV components, supply chain challenges, high commodity and operational costs and declining demand for the company’s products are hurting the stock performance. But does this 30% decline over the past year make for a buying opportunity? Considering the uncertain near-term macro environment, we believe it's better to wait on the sidelines now.
With the fortunes of the RV industry tied to the economy, Winnebago reported a 17.6% and 41% decline in revenues and earnings, respectively, in the first quarter of fiscal 2023. Demand for the company’s premium RV product lineups continued to normalize in the last reported quarter after registering massive growth in fiscal 2021. Demand particularly cooled off in the Towable segment. The downturn is not expected to end anytime soon.
A rising interest rate environment and economic uncertainty will continue to act as spoilsports. The RV space relies heavily on consumers' affordability. Higher interest rates translate to increasing costs of financing and the question is whether customers would be keen on taking a high-interest rate debt to finance their next RV purchase, especially when the economic scenario is so uncertain. The central banks signaled to keep the interest rates higher for longer through 2023 and no rate cuts till 2024. The FOMC has also lowered its GDP growth projection for 2023 from 1.2% to 0.5%.
Amid this backdrop, the RVIndustry Association forecasts RV shipments in 2023 in the band of 379,200-403,600 units, implying a more than 20% decline from the expected 2022 level of 495,300 units. The glum projections are a result of the fears of economic slowdown triggered by high inflation, rising interest rates and aggravated supply chain snarls. Winnebago expects 2023 results to be affected by broader challenges.
However, it also believes that by fiscal 2025 things will turn around for good, with RV sales picking momentum once again. As such, it sticks to its long-term targets unveiled in November 2022. Winnebago aims for $5.5 billion in net revenues in fiscal 2025. While this instills some confidence for long-term investors, the road ahead looks uncertain as of now given the recessionary fears. As such, it’s better to employ a “wait and see” approach on the stock now.
Winnebago currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here.
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Two better-ranked players from the broader sector that you can invest in are CarParts.com (PRTS - Free Report) and China Automotive Systems (CAAS - Free Report) . Both these stocks currently sport a Zacks Rank #1.
Based in Torrance, CarParts operates as an online provider of aftermarket auto parts and accessories. The Zacks Consensus Estimate for PRTS’ 2022 earnings and sales implies year-over-year growth of 85% and 13.2%, respectively. The consensus mark for the 2023 bottom line has improved 58.3% over the past 60 days.
China Automotive Systems is a leading supplier of power steering components and systems in China. The Zacks Consensus Estimate for CAAS’ 2022 earnings and sales implies year-over-year growth of 72.2% and 8.3%, respectively. The consensus estimate for CAAS’s current-year earnings has been revised 7 cents upward over the past 30 days.