The Pullback In Thor Is 'Overdone,' BMO Upgrades To Outperform

Recreational vehicle maker Thor Industries, Inc. THO has slumped about 30 percent in the year-to-date period.

The Analyst

BMO Capital Markets analyst Gerrick Johnson upgraded Thor from Market Perform to Outperform, but maintained the price target at $150.

The Thesis

The discounted valuation of Thor shares relative to the leisure peers and the overall market is due to concerns about higher channel inventory, likely decline in deliveries and the current RV cycle tapering off, Johnson said in a Tuesday note.

The analyst views the RV industry as "fundamentally sound," with retiring Baby Boomers and younger first-time buyers who are enamored with camping experiencing and outdoor lifestyle driving demand. A reduction in personal tax and a strong economy is also boosting demand, the analyst said.

Johnson said 2018 has been off to a strong start with respect to sales for Thor, citing conversations with dealers. The inclement weather that deferred some sales and deliveries is merely a timing issue.

BMO sees the elevated inventory levels as appropriate, as dealers stock ahead of the winter show season and spring selling season.

Even if there is a downshift from a "double-digit industry growth" to a more moderate "high-single digit growth" longer term, BMO still feels Thor shares have overcorrected.

" ... we think the pullback is overdone, presenting a compelling opportunity for investors to buy this high quality company in the fast growing RV industry," Johnson wrote in the note.

Price Action

At time of writing, Thor shares were up 1 percent to $107.23.

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