Back to top

Image: Bigstock

Can Winnebago Replicate This Year's Stellar Show in 2020?

Read MoreHide Full Article

Year 2019 turned out to be an eventful year for Winnebago Industries WGO. Shares of the recreational vehicle (RV) giant crushed the industry as well as the S&P 500 this year with its marvelous run. The stock more than doubled in the year-to-date period, generating returns of 118.1%. Meanwhile, the industry and S&P 500 witnessed growth of 66.5% and 27.2%, respectively, over the same timeframe.

Year to Date Performance

Courtesy of solid financials and game changing acquisitions, Winnebago looks well poised to maintain this year's momentum in the New Year.

Winnebago Looks Solid

Winnebago, which is a leading producer of RVs in the United States, is riding high on the strength of its acquisitions, including the buyout of Grand Design, Chris-Craft and Newmar in 2016, 2018 and 2019, respectively. The Grand Design acquisition expanded the existing towable RV product offerings of Winnebago, while the Chris-Craft takeover enabled the company to enter the marine segment. These acquisitions bolstered the firm’s footprint and diversified its portfolio in the outdoor lifestyle market. Newmar’s buyout is likely to bolster Winnebago’s product line and dealer network and rev up the motor-home segment. The deal will expand Winnebago’s core RV platform, thereby enhancing its position in the North American RV landscape.

Winnebago displays an impressive earnings surprise history, having surpassed earnings estimates in each of the last four reported quarters. Robust results from both its Motorhome and Towable segments are aiding the firm to deliver solid results.

The firm’s impressive organic sales growth and strategic deals have positioned this Zacks Rank #2 (Buy) firm better than its competitors like Thor Industries THOR, Skyline Champion Corporation SKY and LCI Industries (LCII - Free Report) among others. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Winnebago’s increasing free cash flow and strengthening balance sheet enable it to consistently enhance shareholder value and outperform the market. In fiscal 2019, the company generated operating cash flow of $133.8 million, up 61% from the prior year. The firm has a manageable leverage ratio of 36.4%, lower than the broader industry’s 41.04%, which gives it financial flexibility and allows it to tap growth opportunities.

Winnebago’s Winning Streak to Continue in 2020

Clearly, there are plenty of reasons to be optimistic about the stock going into 2020. The RV industry surely holds promise, as millennials are more inclined to spend on experiences that these vehicles can deliver. If the economy stays strong and continues to grow, RV sales will likely get a boost, thereby enhancing Winnebago’s performance. We expect another record fiscal year from the company in 2020. Notably, the Zacks Consensus Estimate for fiscal 2020 earnings and revenues indicates year-over-year improvement of 35.2% and 17.4%, respectively.

Looking for Stocks with Skyrocketing Upside?

Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.

Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.

See the pot trades we're targeting>>

In-Depth Zacks Research for the Tickers Above

Normally $25 each - click below to receive one report FREE:

LCI Industries (LCII) - free report >>