Thor's 'Solid Quarter' Not Strong Enough For This Analyst To Turn Bullish

Thor Industries, Inc. THO, a maker of a range of recreational vehicles, reported Wednesday its fiscal second quarter results which were "solid" but not strong enough for Stifel to turn bullish on the stock.

The Analyst

Stifel's Michael Baudendistel maintains a Hold rating on Thor Industries' stock with a price target boosted from $132 to $142.

The Thesis

Thor Industries reported a slight EPS beat on better-than-expected revenue, Baudendistel said in a note. Encouragingly, the report offered evidence the RV cycle hasn't come to an end given a 34 percent year-over-year rise in backlog coupled with an increase in retail inventories that was in-line with sales growth. In fact, a slightly higher sticker price from rising input costs is unlikely to impact demand.

Thor Industries' management also highlighted two different studies that concluded the average age of an RV buyer has fallen by two to three years, Baudendistel said. This data is consistent with commentary from dealers and implies its addressable market, especially in towables, is expanding.

The most notable aspect of Thor Industries' business is its "very strong" cash flow and the company should be able to use its cash to repay the entire debt associated with its Jayco acquisition, the analyst said. If the company doesn't pursue new M&A deals, it could restart a stock buyback program and it can assume $300 million in repurchases and still building a nearly $500 million cash balance by the end of fiscal 2019.

The analyst recommends investors stay on the sidelines until the company can offer "early evidence of a solid retail sales season."

Price Action

Shares of Thor Industries were trading lower by 4.4 percent Thursday at $116.93.

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Posted In: Michael BaudendistelRecreational VehiclesRVStifelAnalyst ColorEarningsNewsPrice TargetAnalyst Ratings