Got Yourself A Double-Bagger In The Mighty Thor

| About: Thor Industries, (THO)


Thor Industries Inc. continues to be a rather thinly covered name here at Seeking Alpha but I called for a buy a little over year ago.

I discuss performance and expectations of this special name.

Recommendations for this double-up.

Thor Industries Inc. (NYSE:THO) continues to be a rather thinly covered name here at Seeking Alpha, with just a few articles on the name. For readers unfamiliar with this stock, the company is quite interesting and it generates some real profits. Many of you will recognize its products. It designs, manufactures, and sells a range of recreational vehicles and related parts in North America. Across these articles there are those who think the economy is working against the company and those like myself who view the continued depression in oil prices and reduction in unemployment as boons for the industry. When I first covered the stock, I told you to strike while the iron is hot. The call was a bit early, as the stock continued to fall into the autumn, but has since seriously rebounded and is exploding to new 52 week highs. But can this momentum continue? Anecdotally, one of my close friends just retired in 2015 and purchased one of Thor's fifth wheels. They are not cheap. But they are absolutely gorgeous. With the jobs picture improving, a healthy stock market the last few years and oil prices that continue to meander, I think that the environment for this company is looking strong. No need to overthink it. The fundamentals are there. An analysis of the company's recent performance offers some evidence to support this notion.

In its most recent quarter, Thor saw records made. Sales were $1.71 billion, up 66% from last year, as sales of towable and motorized RVs combined for 10% in growth as well as incremental revenue from acquisitions. Gross profit margins were a strong 14% in the quarter. Net income skyrocketed to was $78.7 million, up 56% from last year. The company delivered a strong quarter. It saw earnings per share rose to $1.49. This absolutely crushed estimates by $0.26 and also was a record for the company. Further, the sales numbers also exceeded expectations by $190 million. My thesis is playing out and those who struck when the iron was hot now have a double bagger.

Digging more into the sales numbers, we see that towable RV sales were up 63% from the $744.7 million last year to $1.21 billion this year. Motorized RV sales saw strong growth. They came in at $461.5 million for the quarter, up 84% from $251.1 million reported last year. One of the items I like to look at in this type of business is where its backlog stands. Backlogs are an interesting variable, which represent demand and the ability to fulfill orders. Some backlog is strong, but if it gets too high, it could be. They can represent both high demand, but also an inability to meet the demand. I am of the opinion that Thor was in a position that reflected both components, but was leaning toward higher demand. That said, the backlog increased year-over-year. Given the sales numbers, it implies that the company still sees huge demand, but is able to complete the orders more timely than this time a year ago. Consolidated backlog doubled from last year at the end of the quarter and was $2.11 billion. Towable RV backlog increased 97% to $1.4 billion, while Motorized RV backlog more than doubled to $707 million. The company acknowledged in the past that it now has an increased production capacity. Speaking about the quarter, Bob Martin, Thor President and CEO, stated:

"Fiscal 2017 began like fiscal 2016 ended, with continued robust performance throughout the Company. The strong revenue and earnings growth reflects the ongoing enthusiastic reception of our product offerings by dealers and consumers alike, as well as our ability to effectively manage our growth and integrate acquisitions successfully," said Bob Martin, Thor President and CEO. "Starting with our Dealer Open House in September, our new products have been incredibly well received, with strong year-over-year sales and backlog growth. With continued dealer optimism and steady economic conditions, we believe 2017 will be one of the strongest years for wholesale shipments for the industry since the 1970s. The Jayco integration has gone very smoothly, as illustrated by their meaningful contribution to our revenues and gross profit. We also made good progress on expanding capacity in a disciplined way to meet the strong demand for our products. New facilities or production lines at Dutchmen, Heartland, Highland Ridge, Jayco and Thor Motor Coach ramped up during the first quarter and we are evaluating additional projects to increase capacity where necessary. The need to meet such strong demand is a true testament to our entire team and the great network of dealers, who are important partners in our success."

Looking ahead, with the improvement in Thor's sales to record levels in the quarter, the company was able to continue improving its operating efficiencies, resulting in strong gains across the business. Moving ahead I would like to see margin expansion. The company is setting up for continued record revenues. The company has made a number of acquisitions of both companies and production facilities that should pay future dividends. Considering the difficult sector the company operates in, the fact that it is making amazing strides in its sales and revenues is impressive. I stand behind my buy call, but you should most definitely take a little off the table and book some profits. Congratulations on your double bagger!

Note from the author: Christopher F. Davis has been a leading contributor with Seeking Alpha since early 2012. If you like his material and want to see more, scroll to the top of the article and hit "follow." He also writes a lot of "breaking" articles that are time sensitive. If you would like to be among the first to be updated, be sure to check the box for "Real-time alerts on this author" under "Follow."

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.