It's not a name that you think about all the time. Or at least that I think about much, unless I get away on some kind of road trip. Then I think about it a lot.
Winnebago Industries (WGO) , the RV and motorhome manufacturer, released the firm's fiscal, third quarter results on Tuesday night. The numbers were awesome. For the three month period ending May 28th, Winnebago posted adjusted EPS of $4.13 (GAAP EPS: $3.57) on revenue generation of $1.458B. While the top line grew 52% year over year, beat Wall Street, and set a new firm FQ3 record, the bottom line smashed consensus view by more than a full dollar.
Operating income increased 72.5% to $176.717M, producing net income that increased 64.4% to $117.22M. Operating expenses increased 43.3% to $96.247M.
Segment Performance
Towable... Sales increased 45% to $805.567M driven by increased pricing. Segment adjusted EBITDA grew 47% to $117.767M on an adjusted EBITDA margin of 14.6% (up 30 bps). Backlogs decreased 13.7% y/y and 29.9% sequentially to $1.3B.
Motorhome... Sales increased 34% to $516.345M, also driven by increased pricing and strong unit sales. Segment adjusted EBITDA increased 71.9% to $64.388M on an adjusted EBITDA margin of 12.5% (up 280 bps !!). Backlogs increased 4.8% over last year to $2.3B.
Marine... Sales increased 637% (not a misprint) to $126.548M. Segment adjusted EBITDA increased 1,120% to $19.813M on an adjusted EBITDA margin of 15.7%. Backlogs total $245.4M. The Barletta brand is performing above pro-forma expectations and is delivering margin accretive to Winnebago Industries in total.
The CEO
President and CEO Michael Happe commented in the press release: "The trend in recent quarters continued, as Winnebago Industries delivered impressive third quarter results, driven by our team's focused execution and good progress on reducing our order backlog in the quarter from our expanded portfolio of premier outdoor lifestyle brands." Happe added later... "As we look ahead to our last quarter in the fiscal year, we will maintain our focus in executing our proven strategy and build on our momentum to further grow and solidify our expanded market position."
Balance Sheet
Winnebago ended the quarter with a net cash position of $238.1M (down), and inventories of $486.1M (up), to bring current assets up to $1.118B, including net receivables that were also notably higher. Current liabilities add up to $535.9M. This leaves the firm with a current ratio of 2.08, which is excellent. Even sans the bloated inventories, which is perfectly understandable and makes good business sense in this environment, the firm stands with a quick ratio of 1.18, still quite solid.
Total assets amount to $2.427B including $962M in "goodwill" and other intangibles. Total liabilities less equity adds up to $1.163B including long-term debt of $541M. The firm does not appear to have any short-term or current debt on the books. This balance sheet does get a passing grade. For the near to medium term, the firm should have no problem meeting obligations. I would prefer more cash on hand relative to debt-load, but that does not impact for now, the present. That is what I would suggest improving on however, if asked.
My Thoughts
Winnebago trades at 12 times forward looking earnings. The firm pays shareholders $0.72 per share per year to stick around. That's a yield of 1.57%. Not great, but something, and the stock is certainly not overvalued. I do worry about this firm maintaining the momentum apparently built in a reopening economy as that reopening transforms into an economy mired in a state of contraction.
Readers will see the shares trading higher this morning. These shares appear to have been repelled repeatedly at the 21 day EMA since mid-May. This morning was no different. That line, currently at $47.80, is a huge pivot for this stock. Then comes the 50 day SMA at $51.42, so there certainly is traffic to the upside.
That said, the daily MACD is trying to force a bullish crossover of the 26 day EMA by the 12 day EMA as Relative Strength improves and the Full Stochastics Oscillator pulls away from nearly oversold territory.
I do believe that Winnebago is investable. An interested investor could...
- Purchase 100 shares at or close to the last sale of $47.25
- Sell one January 2023 $60 call for about $3.50.
... to reduce net basis to $43.75
- Sell one January 2023 $35 put for a rough $3.
... to further reduce net basis to $40.75.
Best Outcome: Trader is called away at $60 in January for a net profit of 47.24%.
Worst Outcome: Trader has shares put to him or her in January at $35. Trader would then be long 200 shares at a net basis of $37.88 with WGO trading below $35.
