KeyBanc Initiates On Thor, Winnebago With Bullish Ratings On Favorable Industry Growth

Automobile manufacturers are poised to benefit from industry shipment growth in the mid-single-digit range in 2020, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Brett Andress initiated coverage of Thor Industries, Inc. THO and Winnebago Industries, Inc. WGO with Overweight ratings.

The Thesis

Current channel inventory is “trending toward threshold levels” and inventory turns are significantly above peak levels, Andress said in a note. He added that a survey of more than 100 dealers supports inventory normalization in the second half of 2019 and restocking potential in 2020.

Thor Industries

The company is moving past several headwinds and should recapture lost market share. This would lend earnings upside, while lower material and labor costs should boost margins in fiscal 2020 and 2021. These would create “a sustainable tailwind not accurately factored into current estimates,” Andress said.

The analyst has a price target of $95 for Thor Industries.

Winnebago Industries

Winnebago’s towables market share has expanded from around 3% to more than 7% following the Grand Design acquisition. Grand Design is likely to sustain this outperformance, driven by distribution gains and the potential for new model launches in the future, Andress said.

While saying that Winnebago’s recent Newmar deal brings a premium and profitable brand into the portfolio, the analyst added that the near-term and long-term growth potential of this business seemed to be so far underappreciated.

He has a price target of $67 for Winnebago Industries.

Price Action

Shares of Thor were down 0.44% to $81.05, while Winnebago Industries shares were  down 0.28% to $56.19 at time of publication Monday