Oddly enough, the higher oil prices rise, the more people want to buy a top of the line motor home. That seems to be the conclusion investors can draw from Winnebago Industries, Inc. (NYSE: WGO) recent 4Q and FY 2007 earnings report. Winnebago has introduced a Class C value-priced line of motor homes, but that's not where the sales and profits are. Sales of the top of the line Class A motor homes increased by volume, leading to a 16% increase in revenue in 4Q 2007 and a whopping 59% increase in net income, to just under $15 million, for the quarter. The Class A motor homes have a much higher profit margin, and Class A deliveries are up 48%. Seems like when people are ready to buy a rolling second home, they do not want to do so on a budget.

Despite the good news for the quarter, investors should not start revving their engines just yet. Motor home sales are still soft across the board, and the industry is entering its slowest part of the sales year. Dealers will not boost inventories due to soft demand. Gas prices continue to rise while consumer confidence levels continue to decline.

Winnebago is doing all it can to make the stock attractive to investors. The company repurchased 1.5 million shares of stock during the quarter, at a cost of $44 million. The company will pay a regular quarterly dividend of $0.12 per share. These are, however, actions with a short term impact and do not replace a company's need to increase its profits through organic growth, not real likely for Winnebago under current circumstances.

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Motor home manufacturer Winnebago Industries Inc. (NYSE: WGO) is currently being squeezed by numerous factors, only some of which are under the company's control. To the surprise of no one who has recently been hit in the wallet at the gas pump, demand for gas guzzling behemoths remains soft. Costs for labor and raw materials continue to rise. Consumers who do buy motor homes are price conscious so Winnebago must offer cheaper, lower profit margin models, even though selling expenses due to incentives continue to rise. Thus, no one should have been shocked at Winnebago's recent 3Q 2007 earnings report, which indicated that 3Q profits fell 14% to $11.3 million even though overall revenues were up 5.2% to $231.7 million. Just like with taxes, it is not always about how much you earn. It's about how much you get to keep. And Winnebago is not getting to keep all that much. Revenues have decreased by 4% over the previous three quarters, but net income has decreased by a hefty 24.6% over that same period.

To its credit, the company is responding to concerns over the cost of fuel by introducing a line of more efficient diesel engines in 2008 models. Sales order backlog has increased substantially due to the newer models, although the cost of those sales has also increased. Winnebago repurchased $20 million of its stock during 3Q 2007, but the stock has still lost almost 10% of its value since the beginning of the year. Winnebago stock recently closed at $30.00, up $1.34. While Winnebago's EPS are significantly above industry average, its P/E is as well.