Shares of Winnebago Industries (NYSE: WGO) dropped well over 9% on Friday. This sell-off came in response to the company's third-quarter earnings. They were awful. The top line declined over 39% to $139.7 million. Net income dropped precipitously to $0.10 per diluted share. In last year's Q3, Winnebago booked earnings of $0.35 per diluted share.
Winnebago came out on top in terms of earnings expectations. Wall Street was only looking for $0.03 per share. In this case, though, I think the sell-off was warranted, even with bottom-line performance that was better than expected. First, the company did generate an operating loss. Second, the economy is struggling with high energy prices and the prospect of a Fed that might need to become aggressive against inflation at some point, two things that will not inspire confidence in the consumer. Third, with the market in a tailspin yet again, Winnebago is not a defensive stock at all. It would be like buying Ford (NYSE: F) or General Motors (NYSE: GM) to ride out the recession.
Winnebago's stock is near the 52-week low. It has a high yield, but that does nothing for me. I don't think of this company as a value in the slightest. Putting motor homes in my portfolio in this environment is not my idea of fun.
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
6-22-2008 @ 10:32AM
Speculator said...
Any companies using oil will suffer. If oil goes higher these companies will do worse. Right now oil is cheap,
www.theinvestingspeculator.com
6-23-2008 @ 9:34AM
Greg Gerber said...
Maintain that mindset at your peril folks. Check the demographics of the RV industry and you'll see why it will not only bounce back, it will roar back.
These "analysts" perpetuate one of the biggest myths impacting the industry -- that gas prices will kill it. Yet, when people look at the facts, they realize what a silly argument it is.
If the average RV owner drives his 8 mpg motorhome 3,500 miles per year, and the cost of gas goes up $1 per per gallon, he will spend $437.50 more in gasoline. Over a six month season, that's $73 more per month. Is that enough to disuade someone from plunking down $100,000 on a new motorhome? No way.
Consumer confidence is impacting the industry due to the constant drumbeat of unwarranted economic doom-and-gloom shoveled out by the news media. It is also an election year where control of the White House is up for grabs.
Review the RV industry's past, and you'll see that in most election years, sales have declined as consumers become worried about how the election will impact their lives. Once the lasts ballots are counted (or counted twice in Florida), people shrug their shoulders and go on about their lives.
2009 will be a rebound year for the RV industry and now is the best time to find the stock bargains.
I bought WGO in 2000 (an election year) when shares were trading at $11. Within a few years, after the "analysts" predicted doom and gloom for RVs post-9/11, I sold the stock at $50 a share.
What an idiot I was. The stock soon shot up to $70 and split.
Yes, the RV industry is struggling a bit this year, but Winnebago has excellent fundamentals, is debt free, well run and produces quality motorhomes that have a very good reputation among RV owners.
Go WGO!
GREG GERBER, Editor
RV Industry News