AAPL 175.04 4.3271% MSFT 427.93 1.1033% GOOG 160.79 1.9853% GOOGL 159.41 2.0943% AMZN 189.05 1.6671% NVDA 906.16 4.1097% META 523.16 0.6406% TSLA 174.6 1.6535% TSM 147.2 0.6702% LLY 759.59 -0.3137% V 275.68 0.4372% AVGO 1382.46 4.5441% JPM 195.43 -0.0205% UNH 441.72 -1.8509% NVO 125.4 0.3762% WMT 60.09 -0.8743% LVMUY 171.12 0.5228% XOM 121.78 -0.3437% LVMHF 857.08 0.5255% MA 468.31 -0.1833%

Diversified Opportunities Report

Thor Industries Inc.

Jun 23, 2022

THO:NYSE
Investment Type
Mid - Cap
Risk Level
Action
Rec. Price ($)

 

Thor Industries Inc. (NYSE: THO) produces a variety of recreational vehicles (RVs) in the US and distributes those vehicles, along with related parts and accessories, mostly in the US and Canada. North American Towable Recreational Vehicles, North American Motorized Recreational Vehicles, and European Recreational Vehicles are the three reportable segments through which the company does business.

THO Details

Recent Developments

  • The distribution of a normal quarterly cash dividend of USD0.43 per share was approved by the board of directors at its meeting, according to a statement released by THOR Industries Inc. on June 21, 2022. The regular cash dividend is payable on July 19, 2022, to shareholders of record at the close of business on July 5, 2022.
  • On Monday, June 27, 2022, starting at 9:00 a.m. Eastern Time, THOR Industries Inc. will have its Investor Day at the Airstream corporate offices in Jackson Center, Ohio. A series of presentations on the strategic framework of THOR, long-term financial goals, and capital allocation priorities will be given by Chief Executive Officer Bob Martin and the senior leadership team.
  • THOR Industries Inc. disclosed on April 1st, 2022, that it has signed a Letter of Intent to sell a majority stake in its digital application company, TH2Connect, LLC. A majority interest in the company will be bought for USD81 million by Graham Allen Partners, an Indiana-based private equity firm with a focus on enhancing value via technology and digital transformation. 
  • Under its 0 million share repurchase program, the company acquired around USD40.0 million worth of common stock during the third quarter.

Key Takeaways from third quarter FY23 financial results

  • In comparison to the third quarter of fiscal 2021, when consolidated net sales were USD3.46 billion, they were USD4.66 billion in the third quarter of fiscal 2022. In addition to the rise in the number of units sold, an increase in the average sales price of our units had a significant influence on the growth in consolidated net sales.
  • In the third quarter of fiscal 2022, the consolidated gross profit margin grew by 270 basis points to 17.3% from 14.6% in the comparable period the previous year due to operational enhancements that focused on the margin and the low discount environment.
  • For the third quarter of fiscal 2022, THOR Industries' net income attributable to the company and diluted profits per share were USD348.1 million and USD6.32, respectively, up from USD183.3 million and USD3.29 for the same time in the previous year.
  • The third quarter's earnings per share increased by 92.1% from the same quarter the previous fiscal year, when they were USD3.29 per diluted share, to USD6.32 per diluted share.

Balance Sheet & Liquidity Position

  • Cash and equivalents, and long-term debt totalled USD331.98 million and USD1.98 billion respectively, as of April 30, 2022, compared with USD 448.71 million and USD 1.59 billion as of July 31, 2022.
  • Net cash provided by operating activities for the nine months ended April 30, 2022, was USD637.5 million as compared to net cash used in operating activities of USD175.1 million for the nine months ended April 30, 2021.

Key Risks

  • Macroeconomic risk: The current macroeconomic conditions have an influence on the RV industry's calendar 2022 retail selling season, and although North American industry retail towable demand is predicted to be lower than the historically high levels of recent quarters. The RV Industry Association has revised its North American wholesale prediction for shipments for the calendar year 2022 to be between 537,800 and 561,900 units with a most probable total of 549,900 units considering the recent slowdown in North American retail demand.
  • Growing Quality and Margin Slippage: Thor Industries Inc. operates in a market where almost every RV it and its rivals build sells rapidly. It is simple to slip into the overproduction trap in this circumstance.

Outlook

The company anticipates the calendar year 2022 North American RV industry retail sales of between 460,000 and 480,000 units, which would represent one of the best years of North American RV retail sales on record, barring additional macroeconomic impacts. The company believes retail demand for the remainder of the fiscal year 2022 and the start of the fiscal year 2023 will be strong. Furthermore, the company will share its long-term vision, priorities, and financial targets at its investor day on June 27, 2022.

Top shareholders

The top 10 shareholders together form around 57.56% of the total shareholding, while the top 4 constitute the maximum holding. Kayne Anderson Rudnick Investment Management LLC and Vanguard Group Inc. hold the maximum stake in the company at 10.30% and 9.74%, respectively, as also highlighted in the chart below:

Source: REFINITIV, Analysis by Kalkine Group

Valuation Methodology: EV/Sales Multiple-Based Relative Valuation

Source: REFINITIV, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation

Over the past six months, THO’s share price has corrected by 23.47%. The stock is currently leaning towards the lower end of its 52-week range of USD 66.26 to USD 128.87. The current price as can be seen in the graph is below both short-term (40-day) SMA and long-term (200-day) SMA, with an RSI of 51.07. The likelihood of the beginning of a bullish cycle for the stock is high because the price has made higher lows and has strong RSI momentum. We have valued the stock using the EV/Sales multiple-based relative valuation method and arrived at a target price of USD 93.92. We believe that the company is trading at a discount from its peer's average regardless of strong fundamentals, and competitive advantages in profitability margins of the company which give bullish estimates for the upcoming near future.

Considering the strong fundamentals, robust top-line results, positive outlook, technical analysis, associated risks, and current valuation, we give a "Buy" recommendation on the stock at the closing price of USD 75.50 as of June 22, 2022.

1-Year Technical Chart, as of June 22, 2022. Data Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

*Entry Price as of June 22, 2022.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.


Disclaimer-

Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.

Kalkine Media LLC, an affiliate of Kalkine Equities LLC, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.