Founded in 1958, Winnebago Industries, Inc. (NYSE:WGO) sells its iconic recreational vehicles through a network of over 460 dealers throughout the U.S. and Canada. Winnebago controls approximately 20% of the traditional motor coach market and it moved into the towable coach segment with its 2010 purchase of competitor Sunnybrook. The company’s very conservative balance sheet enabled it to survive the industry’s deep recession relatively unscathed, while allowing it to continue investing in new product development.
In its latest fiscal year, Winnebago Industries, Inc. (NYSE:WGO) posted mixed results, with a 17% increase in revenues and a 16% decline in operating income. The company’s sales benefited from a sharp increase in unit volume, as well as improved pricing as its customers opted for more expensive models. However, Winnebago’s razor-thin operating margin, 1.6% in FY2012, was negatively impacted by higher commodity costs and aggressive discounting of its products in the first half of the year.
Looking ahead, Winnebago Industries, Inc. (NYSE:WGO)’s prospects are strong as the industry currently expects an 8% unit sales increase in 2013. In addition, the company has improved its competitive position by expanding into the lower-priced, towable coach market. With a year-over-year doubling in the value of its backlog as of August 2012, Winnebago Industries, Inc. (NYSE:WGO) should be able to earn solid future gains in profitability as it leverages its manufacturing operations.
Founded in 1980, Thor has become the country’s largest manufacturer of recreational vehicles primarily due to a long string of acquisitions, including purchases of competitors Dutchmen in 1991 and Keystone in 2001. The company has also become the leading manufacturer of small and mid-sized buses for the municipal market, a segment that accounted for roughly 16% of Thor Industries, Inc. (NYSE:THO)’s total sales in 2012. Similar to Winnebago Industries, Inc. (NYSE:WGO), Thor maintained a conservative balance sheet through the financial crisis, allowing it to acquire weaker competitors and gain market share.
In FY2013, Thor Industries, Inc. (NYSE:THO) has reported solid financial results, with increases in revenues and operating income of 27.3% and 31.0%, respectively, compared to the prior-year period. The company’s operating margin gained slightly, as it was able to offset rising commodity costs with operating efficiencies in its manufacturing network. Despite a weak operating margin in its bus segment, due to difficult funding challenges for its municipal customers, Thor Industries, Inc. (NYSE:THO) sees the segment as a growth market as people continue to gravitate toward public transit.
Looking ahead, Thor Industries, Inc. (NYSE:THO) should also benefit from the improved industry sales environment in 2013 and beyond. In addition, its shareholder-friendly management team has continued to look for complementary segments to add to Thor Industries, Inc. (NYSE:THO)’s core recreational vehicle business. With a strong current sales backlog, the company should post solid increases in income this year as it adds acquired brands to its overall manufacturing base.
Investors looking for an investment in the recreational vehicle space might also want to consider leading suppliers to the industry, like Patrick Industries, Inc. (NASDAQ:PATK). Founded in 1959 as a distributor of paneling to motor coach manufacturers, Patrick Industries now manufactures a range of products that includes hardwood doors, cabinets, and wall panels through a network of 12 U.S. plants. The company has successfully used the acquisition channel to diversify its product offerings, including purchases of lighting and hardwood door manufacturers in 2012.
In FY2012, Patrick Industries reported strong financial results, with increases in revenues and operating income of 42.1% and 100.7%, respectively, versus the prior year. The company’s sales growth benefited from four acquisitions in 2012, as well as a 20% organic increase in its legacy business. In addition, Patrick Industries’ operating margin increased due to an improved price environment for its product portfolio. Looking ahead, the company should be able to ride the industry’s sales momentum and continue to pick up market share in the fragmented RV supplier industry.
Despite high prices for its products, the RV industry is well positioned for future sales growth with large expected increases in its retirement-age, core customer base. The industry is also trying to reduce its cyclical nature by offering lower-priced products that would appeal to younger seasonal users. While these companies aren’t for the buy-and-hold crowd, the industry’s current upswing could lead to gains for investors willing to take the volatility.
The article Made in America: RVs originally appeared on Fool.com and is written by Robert Hanley.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
