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From the RV Industry News Blog:
"Recreation vehicle sector littered with roadkill
Greg Gerber posted on November 19, 2008 09:38
TORONTO -- It's ironic that the RV manufacturers rode out the mild 2002 recession in fine form. Gasoline was modestly priced and the havoc of 9/11 convinced many to avoid travelling abroad and instead see more of their own country. It also helped that financing was more akin to a home mortgage than a vehicle loan, with payments spread out over 20 years. And for Americans literally living on the road, interest is even tax-deductible.
Many of the larger players in the industry are well established and have a good history of profitability and paying dividends. Unlike so many other industries, U. S. manufacturers have not had to contend with foreign competition, which has helped plump margins. Over the past decade Winnebago built up its dividend from 10 cents a share annually to 48 cents. In 2004, the company earned a profit of $70. 6-million on revenue of $1. 1-billion, with the stock price cruising along in $27-$39 range.
Another popular value stock was Monaco Coach, which targets well-heeled retirees with luxurious motor homes tipping the scales at up to $1-million. At that price, lousy gas mileage is the least of your problems. The company also did well in 2004, earning $37. 5-million on sales of $1. 4-billion, pushing the stock price to the $30 mark.
The largest in the RV field is Fleetwood Enterprises, selling $1. 8-billion worth of RVs in 2004. That year it also pulled in another $780-million from its manufactured-homes division. The company has had trouble recapturing the glory days of the late 1990s, but the stock still managed to hit $16 in April, 2004.
If you're reading this, then it's a safe bet that the market has been unkind to you this year. But the astonishing breadth of this downturn nonetheless masks the fact that some areas really have been hit harder than others. The implosion of the RV sector has been nothing short of hellacious. Winnebago suspended its dividend last month and the stock is now $5. 06. Monaco has been desperately trying to refinance its debt; the stock is trading at $1. 20. Fleetwood is on death's door, its common stock diluted to a thin gruel by a debenture conversion; it's now changing hands at 20 cents.
For the hardboiled contrarian picking over this roadkill, the class of the field is probably Thor Industries (THO-NYSE). It has suffered as well, but a strong balance sheet with no debt and $189-million in cash provides maneuvering room and a degree of safety for its dividend. The company is also better diversified with its bus division, and it is reasonable to expect that school buses and mass transit will be somewhat more resilient in the recession.
Will Thor be able to take advantage if some of its competitors fail? If manufacturing capacity is substantially reduced, Thor might be able to grab the lion's share of a contracted market. But as we've seen with steel and airlines, competitors can emerge from Chapter 11 unencumbered by debt and with a lower cost structure. The road to making money in the RV business may be long and winding indeed.
SOURCE: The Globe and Mail
Posted in: Manufacturing News"
"Recreation vehicle sector littered with roadkill
Greg Gerber posted on November 19, 2008 09:38
TORONTO -- It's ironic that the RV manufacturers rode out the mild 2002 recession in fine form. Gasoline was modestly priced and the havoc of 9/11 convinced many to avoid travelling abroad and instead see more of their own country. It also helped that financing was more akin to a home mortgage than a vehicle loan, with payments spread out over 20 years. And for Americans literally living on the road, interest is even tax-deductible.
Many of the larger players in the industry are well established and have a good history of profitability and paying dividends. Unlike so many other industries, U. S. manufacturers have not had to contend with foreign competition, which has helped plump margins. Over the past decade Winnebago built up its dividend from 10 cents a share annually to 48 cents. In 2004, the company earned a profit of $70. 6-million on revenue of $1. 1-billion, with the stock price cruising along in $27-$39 range.
Another popular value stock was Monaco Coach, which targets well-heeled retirees with luxurious motor homes tipping the scales at up to $1-million. At that price, lousy gas mileage is the least of your problems. The company also did well in 2004, earning $37. 5-million on sales of $1. 4-billion, pushing the stock price to the $30 mark.
The largest in the RV field is Fleetwood Enterprises, selling $1. 8-billion worth of RVs in 2004. That year it also pulled in another $780-million from its manufactured-homes division. The company has had trouble recapturing the glory days of the late 1990s, but the stock still managed to hit $16 in April, 2004.
If you're reading this, then it's a safe bet that the market has been unkind to you this year. But the astonishing breadth of this downturn nonetheless masks the fact that some areas really have been hit harder than others. The implosion of the RV sector has been nothing short of hellacious. Winnebago suspended its dividend last month and the stock is now $5. 06. Monaco has been desperately trying to refinance its debt; the stock is trading at $1. 20. Fleetwood is on death's door, its common stock diluted to a thin gruel by a debenture conversion; it's now changing hands at 20 cents.
For the hardboiled contrarian picking over this roadkill, the class of the field is probably Thor Industries (THO-NYSE). It has suffered as well, but a strong balance sheet with no debt and $189-million in cash provides maneuvering room and a degree of safety for its dividend. The company is also better diversified with its bus division, and it is reasonable to expect that school buses and mass transit will be somewhat more resilient in the recession.
Will Thor be able to take advantage if some of its competitors fail? If manufacturing capacity is substantially reduced, Thor might be able to grab the lion's share of a contracted market. But as we've seen with steel and airlines, competitors can emerge from Chapter 11 unencumbered by debt and with a lower cost structure. The road to making money in the RV business may be long and winding indeed.
SOURCE: The Globe and Mail
Posted in: Manufacturing News"
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