Baird upgraded recreational vehicle maker Thor Industries, Inc. THO to Outperform on strong retail momentum, potential for margin upside and benefits from tax reform.
Thor is the RV market leader with 49 percent of the towable market and 36 percent of the motor home market. Baird’s checks show solid consumer demand for RVs, especially towables.
On The Road Again
“We believe favorable demographics (baby boomers and Gen Xers) have converged with wealth creation (better employment, record stock market, healthy real estate values). We also note growth in SUVs and pickup trucks has created more towing capacity than ever in America,” analyst Craig Kennison wrote in a note.
On the inventory front, despite late in the inventory restocking cycle, Kennison noted that dealer inventory appears fresh and appropriate for current demand trends.
In addition, Thor is among the key beneficiaries of potential tax reform as it builds every RV in the United States, a move that also limits currency headwinds. Further, the potential tax reform could boost discretionary income for some consumers.
On the valuation front, Kennison said it is reasonable at near 15x EPS amid healthy fundamentals and good momentum into spring retail trends.
“At some point, demand will slow and dealers will destock, but for now, we see the potential for alpha through the summer given the robust demand environment and potential policy changes,” Kennison added.
At last check, shares of Thor were up 4.53 percent at $109.25 after setting a new 52-week high of $109.85.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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