Winnebago Investors Breathe A Sigh Of Relief  Winnebago's Q2 results point to normalization within the RV market and a return to real growth that could begin by Q1 2024.

Winnebago (NYSE: WGO) results have the stock moving higher because they show the worst may be behind it and the RV industry. RVIA reports indicate shipments were down more than 60% in January, which suggests the results could have been far worse. The takeaway from the report is that Winnebago’s diversification strategy, which leans hard on its newer Marine segment, is behind the strength. Results within the RV segment were also favorable and indicated normalization could be close at hand.

Normalization, a period post-upheaval, i.e., no more impact from COVID. This could be the first glimmers of a soft landing for the economy, but that will come down to the Fed and how tight they tighten and how much economic cracking they cause. 

Winnebago Outperforms Expectations With Style 

Winnebago is among the top brands regarding RVs, and that is helping to drive its results. The company reported $866.7 million in revenue, a decline of 25.3% compared to last year but outperformed the Marketbeat.com consensus by more than 1000 basis points. Segment results are mixed but offer some glimmers of hope that an end to YOY contraction is close and growth will resume again. The next comp will be the toughest, compared to the peak of COVID sales and a company record, but the next will be easier, and growth may resume in Q1 2024. 

Segment results include a 47% decline in Towables, a 3.3% decline in Motorhomes, and a 16.1% growth in the Marine segment. The decline in Towables is a concern, but this is “normalization” after the mad rush to buy trailers and whatever kind of camping gear people can find to social distance with. The steady business in Motorhomes and growth in Marine should help sustain operational quality until the Towable market is realigned. 

Margin is another area of strength for Winnebagor. The company experience margin contraction at the gross and operating levels but far less than expected. The EBITDA fell by 41.3% and adjusted by 40%, but the $1.88 in earnings is $0.63 better than expected, helping sustain a healthy balance sheet and dividend-paying ability. The dividend isn’t a high yield, but the 1.85% is easily sustainable at 6.5% of earnings and is expected to grow. The stock trades at a low 8X earnings, adding another attractive element to the mix. There isn’t much expectation for a multiple expansion, but cheap is cheap when discussing dividends and income-generating stocks. 

The Analysts Support Winnebago, See 20% Of Upside

Marketbeat’s analyst tracking tools have not registered any new reports since the Q2 release, but the trend supports the share price. The analyst sentiment is pegged at Moderate Buy, down from a more substantial Moderate Buy last year, and the price target is firming. The price target is down from last year but rising compared to last month and last quarter, showing a bottom in sentiment. Assuming the company continues to navigate the normalization process as it has, the sentiment should begin to firm later in the year. 

The price action is mixed. The stock surged at the open but fell under the weight of what could be reinvigorated short-selling. The short interest was near 20% at the last report, with off-exchange volume in the 85% region. Regardless, the post-release gains were capped below $64 and may remain range bound between $64 and $52 until later in the year.