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Shares of Thor Industries (THO), the manufacturer of recreational vehicles and mid-sized buses, rose some 12% in after hours trading on Wednesday. Thor reported a strong set of fourth quarter results, prompting enthusiasm among investors.

Fourth Quarter Results

Thor Industries reported fourth quarter revenues of $888.2 million, up 15% on the year. Revenues came in slightly ahead of analysts consensus of $887 million. Operating income rose 14% to $61.5 million. While towable RV operating income rose a mere 8% to $54.2 million, motorized RV operating income doubled to $7.3 million.

Net income rose some 20% to $44.4 million. Earnings per share rose some 27% from $0.66 per share last year, to $0.84 per share in 2012. Earnings comfortably beat analysts consensus of $0.77 per share. The company now holds a 37% market share of the U.S. market for mid-sized buses. Thor is also the second largest manufacturer of ambulances in the U.S., with a 15% market share. The company reported a strong end to its 2012 results. Fourth quarter revenue and profit growth exceeded full year growth rates. Full year revenues rose 12% to $3.08 billion, while net income rose 15% to $121.7 million.

Chairman Peter B. Orthwein commented on the results, "Thor delivered record annual revenue and improving results in the fourth quarter and 2012 fiscal year, driven by a growing RV market and continuing solid bus market. Assuming stable macroeconomic conditions, we anticipate continuing increases in both of our industries through the remainder of calendar 2012 and into 2013, fueled by growth in RV retail sales, right-sized RV dealer inventories and demand for replacement buses."

Valuation

Thor Industries ended its fiscal 2012 with $219 million in cash and equivalents. The company operates without the assumption of any debt, for a comfortable net cash position. Full year net sales for 2012 came in at $3.1 billion. Net income came in at $121.7 million, or $2.26 per diluted share.

Factoring in a 12% jump in after hours trading, the market values Thor Industries at roughly $2.0 billion. Operating assets are valued at roughly $1.8 billion, given the strong net cash position. The market currently values Thor at 0.6 times annual revenues and 15 times 2012 annual earnings. Currently, Thor Industries pays a quarterly dividend of $0.18 per share, for an annual dividend yield of 2.1%.

Investment Thesis

Year to date, shares of Thor Industries have returned some 40%. Shares moved to the upside of the $27-$33 trading range, but have risen to $39 in after hours trading. Over the past five years, shares have fallen some 20%. Shares fell to lows of $10 in the beginning of 2009, and have traded within a $20-$35 trading range over the past three years. Shares currently trade at their highest level since 2007.

Between 2008 and 2012, annual revenues rose from $2.6 billion towards $3.1 billion. Net income rose from $92.7 million in 2008, to $121.7 million in 2012. Earnings per share rose from $1.66 per share to $2.26, over the same time period. Annual dividends rose from $0.28 per share to $0.72 at the moment.

Investors in Thor have had a great year so far. The company has an excellent track record. Even in 2009, when the company reported revenues of $1.5 billion, just half the level generated in 2006, Thor reported a net profit. The company's lean manufacturing base and strong market share are strong assets in a struggling economy. Thor looks with confidence into its fiscal 2013, as the order backlog rose some 47% to $336 million.

Long term investors could hold on to their shares, as profits and the share price have not reached their peak levels of 2006 yet. The near term outlook for a quick trade looks a little bit more risky given the recent momentum. Long term holders have another 50% upside, before shares take out their all time highs of $55 set in 2006.

Source: Thor Industries: Shares Pop After Strong End To 2012