Undervalued Thor Industries Hammers Out Heavenly Quarter
Thor Industries (NYSE: THO) has been one of our favorite post-pandemic stories and a market we think is gearing up for another run higher. The company has been working hard...
No Love For Thor Industries Robust Performance
Thor Industries (NYSE: THO) has been one of our favorite post-pandemic stories and a market we think is gearing up for another run higher. The company has been working hard on organic and acquisitional growth that are both supported by strong secular trends within the industry. The RVIA is forecasting better than 40% industry growth in 2021 on top of double-digit growth in 2020 and looking for growth to continue next year as well. It is worth noting growth will slow to a low single-digit rate but remember, the industry has nearly doubled in the last two years and backlogs are at record levels. If anything, Thor Industries will outperform that forecast and deliver another year of record-setting results for investors.
Thor Industries Smashes Through The Consensus
Thor Industries was expected to produce a strong quarter and we ourselves were expecting outperformance versus the Marketbeat.com consensus estimates. What we got was a quarter so strong it is forcing a reevaluation of the coming year. The company reported $3.95 billion in consolidated revenue which is up 55.5% over last year and last year’s revenue grew 17% in Q1. in terms of the expectations, the revenue beat the consensus by 1400 basis points on both organic and acquisitional strength. The addition of Tiffin last year and Airxcel this year contributed about 800 basis points worth of the growth leaving the bulk to organic demand.
On a segment basis, North American Towable sales rose 61% and came with a 240 basis point improvement in margin. North American Motorized sales rose a stronger 87% and also came with wider margins. This was offset by a weaker 5% increase in European sales that came with a 130 basis point decline in margin. Regardless, the company’s gross margin expanded by 170 basis points to 16.6% and drove GAAP earnings to record levels and well above the analyst’s consensus. The $4.34 in GAAP earnings is $1.15 better than expected and we see this kind of strength persisting into the coming quarters.
Thor Industries did not give specific guidance but referenced the RVIA outlook when making its forward-looking comments. Management says the RVIA outlook is in line with their own and that Thor Industries should outperform the broader market. With record backlogs, acquisitional strength, and cost synergies in the mix we expect Thor Industries to outperform the market consensus by 1500 to 2000 basis points. With shares already trading at a mere 8X the consensus this stock is grossly undervalued.
The Analysts Are About To Drive Thor Industries Higher
The analysts rate Thor Industries a solid Hold but we think that could change dramatically in the very near term. There are 10 analysts covering the stock, none have issued a major update since the last earnings report, and the Marketbeat.com consensus estimates are lagging the forecast to such a degree they are begging to be updated. The key takeaway is that the analysts think this stock is undervalued as well. The Marketbeat.com consensus estimate of $141.50 assumes about 34% of upside from the $105 level and even the low price target assumes double-digit upside.
The Technical Outlook: Thor Industries Struggles With Resistance
Shares of Thor Industries tried to move higher on the Q1 news and outlook but resistance at the short-term moving average capped gains. The resistance is due in large part to short-selling and it may cap gains in the near term. The caveat for bears is that support is strong above $100 and will likely keep price action from declining much further. In our view, short-covering will start soon if it hasn’t already begun and open the door for a serious rally. If the analysts start upping their expectations as we expect them to do this market might start moving higher again. Once the market realizes the value in this stock it could easily see a multiple expansion that doubles or triples the current price.