Is Winnebago Stock A Buy?

Is Winnebago Stock A Buy? It’s a huge, magnificent world out there, and adventurers have a choice: fly over it or travel through it, taking in sights and experiences along the way.

Winnebago caters to explorers who prefer the open road and the great outdoors – and there are a lot of them. An estimated one million people in the United States choose to live in RVs full-time, and nationwide, more than nine million households own and use an RV. 

At last count, 40 million Americans travel by RV on a regular basis – perhaps because pets are welcome on these sorts of road trips. Roughly 50 percent of RV journeys include dogs, cats, and other critters.

It is common for RV enthusiasts to spend up to four weeks living in these vehicles, often at one of the nation’s 16,000-plus parking facilities and campgrounds with RV-friendly facilities. 

More Women Are Choosing RVs Than Ever Before

While an RV adventure sounds like it could be lonely, there is a massive community that travelers can tap into no matter where they go. Winnebago offers scheduled events, a network of guides, and an online forum to support RV-ers in making connections while on the road.

For a large number of RV owners, it’s more than a vacation – it’s a lifestyle. This is apparent in the millions and millions of social media posts that include hashtag #vanlife. 

For years, recreational vehicles – and Winnebago in particular – have catered to their primary demographic: men between the age of 38 and 55. However, that’s starting to change, and the industry is catching up.

Women are choosing RV exploration more frequently, both on their own and with female companions. Millennials are also choosing RV travel over other options. Today, this group makes up 38 percent of all RV owners in the US. 

Certainly, COVID-19 has had an impact on all sorts of travel, and RV travel has gone through its own downturn. However, most analysts expect the RV industry to recover more quickly than airlines, cruise lines, and hospitality for the simple reason that RVs are self-contained. Social distancing is part of the experience, with or without a pandemic. 

With that said, investors interested in adding this type of company to their portfolios want to know, is Winnebago stock a buy? 

Winnebago Has An Extensive RV Product Line

Since 1958, Winnebago has built some of the most popular recreational vehicles in the world.

Product lines include Winnebago Motor Homes, Winnebago Towables, Winnebago Specialty Vehicles, Grand Design Towables, Chris-Craft Marine, and Newmar MotorHomes. This wide selection ranges from temporary living quarters that can be towed by pickup trucks to self-contained motorized vehicles that all but replace traditional houses. 

Most Winnebago products are intended for outdoor enthusiasts, but the Specialty Vehicle division serves another purpose. This group works on mobile health clinics, mobile law enforcement command centers, and mobile office spaces.

Unlike mobile homes, which can technically be moved though the cost to do so is quite high, RVs are easy to relocate. This makes them ideal for emergencies in which a rapid response is required. 

In one recent example, Winnebago partnered with community organizations to deploy six mobile opioid centers to rural Colorado towns. The vehicles are specially designed to bring care and treatment to underserved populations at high risk of experiencing the negative effects of substance misuse. 

Winnebago’s main market might be traditional outdoor enthusiasts, but the company is always focused on enhancing its product line to meet the needs of niche populations. One of the company’s values is this: 

We understand and care deeply about their unmet needs. Our drive to elevate their ownership experience is pervasive in every area of our business.

To that end, Winnebago recently released an updated line of accessible RVs that include features like platform wheelchair lifts, larger bathrooms, wider hallways, and wheelchair tie-downs. 

In short, Winnebago doesn’t settle for simply building on its long tradition of standard recreational vehicles. The company consistently innovates and designs new ways to get all sorts of people outdoors. 

Is Winnebago Stock A Buy?

The truth is that investors and analysts were worried about Winnebago in the spring. COVID-19 decimated sales, and revenues were down significantly.

Some wondered whether the company would recover quickly, as most consumers put large discretionary purchases on the back burner given the uncertainty of the market. 

However, Winnebago was optimistic going into the summer months – historically its most lucrative sales period. As it happens, that optimism was well-placed, and when Winnebago ended its fiscal year 2020 on August 29th, both the quarterly and the full-year results were solid. 

Revenues for the quarter came in at $737.8 million, which represents an increase of 39.1 percent year-over-year.

Pent-up demand from the previous quarter proved helpful in turning financial results around. Winnebago reported gross profit of $122.5 million – a substantial increase over the previous year’s $83.2 million. 

Net income totaled $42.5 million – a gain of 33.2 percent year-over-year – and diluted earnings per share reached $1.25.

Adjusted earnings per diluted share were reported at $1.45 for the quarter, which is an increase of 45 percent as compared to the same period in 2019.

All in all, both investors and analysts were pleased with the company’s progress – and its clear resilience in the face of unprecedented challenges. 

Based on this turnaround and the company’s signals that further growth may come over the next year, most agree that Winnebago stock is a buy.

Risks Of Buying Winnebago Stock

Winnebago has been a stable, steadily growing stock for years, and despite COVID-related challenges, the consensus is that the company will continue to be successful for the foreseeable future.

At the moment, the biggest risk facing shareholders is a temporary drop in stock prices due to the on-going pandemic-related economic volatility. 

Fiscal fourth quarter 2020 came in strong, making up for the previous quarter’s decline. Consumers have made it clear they are far more comfortable with self-contained road trips and camping trips than they are with traditional travel.

Of course, another market crash is likely to disrupt the RV industry, as RVs are costly and not strictly essential. If the current economic recovery slows or reverses, sales may go back down. 

Again, though, such a decline is expected to be temporary, as RVs are more popular than ever. This was a clear trend pre-pandemic, and it is likely to be even more pronounced in a post-COVID world. 

Can Winnebago Competitors Win?

There are dozens of RV manufacturers operating in the United States, and many of them are in direct competition with Winnebago. The three biggest competitors include Forest River, Thor Industries (THO), and REV Group. 

Forest River is owned by the Berkshire Hathaway (BRK.B) holding company, and it boasts more than 100 manufacturing plants.

In terms of production capacity, Forest River is far and away the largest RV company, though it is in second place in terms of revenue. Some of Forest River’s subsidiaries include Coachmen RV, Dynamax luxury motorhomes, Palomino travel trailers, and Shasta RVs.

Thor Industries (THO) is widely considered the largest RV company in the world, both by revenue ($7.25 billion in 2019) and by market share. It controls more than a third of the entire RV industry, including subsidiaries Airstream, Dutchmen, Keystone, and Jayco. 

REV Group was launched in 2010 as a merger of four companies: Collins Industries, Halcore Group, E-One, and Fleetwood Enterprises. The combined organization has had far more success than its individual companies did, thanks to shared resources and economies of scale. 

While each of these three companies competes with Winnebago, there isn’t much concern that they will push Winnebago out of the market.

Among other things, Winnebago can’t keep up with demand for its vehicles, so it is already working at maximum capacity.

The company could easily justify adding manufacturing capacity and still leave potential revenue on the table. In other words, demand is so high – and expected to move higher – that there is more than enough to go around. Winnebago’s reputation and brand recognition has it well-positioned to take full advantage of the expected RV boom. 

Is Winnebago Stock A Buy? The Bottom Line

The bottom line is that Winnebago stock is a buy, though new investors should consider it a medium or long-term addition to their portfolios. Short-term, there may be some gains, but a sudden, temporary drop in share prices is certainly possible given the complexities presented by COVID-19. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.