Morningstar | Winnebago's Spring Selling Season Hit by Chassis Shortage; Grand Design Boosts Fiscal 3Q. See Updated Analyst Note from 19 Jun 2019
We are not changing our Winnebago Industries fair value estimate after incorporating fiscal 2019 third-quarter results into our model. Diluted earnings per share of $1.14 grew 11.8% year over year and beat consensus even after adjusting down to $1.10 for a $0.04 gain on a change in research and development tax credit estimates. Revenue declined 5.9% to $528.9 million, missing consensus of $564 million. We see no change to our investment thesis, and we are pleased to see the company's towable business continuing to grow. CEO and president Mike Happe announced on the call that the Grand Design towable brand will receive a new plant in Indiana in fiscal mid-2020. Chris-Craft, the premium boat brand that Winnebago bought about a year ago as part of its transformation to an outdoor lifestyle company, will also get a new plant next year in Sarasota, Florida.The towable segment grew revenue 10.8% year over year on a 6.5% rise in deliveries. Segment adjusted EBITDA margins rose 200 basis points to 16.5% driven by higher volume, some price increases, and supply chain management to deal with higher input costs. The motor home group struggled with segment revenue down 35% and deliveries down 31%. All three motor home classes posted double-digit volume declines as dealers continue to lower inventory, a headwind management also cited in fiscal second-quarter results. Class B motor homes had a supply chain problem due to issues with an unnamed chassis supplier. The problem is improving, and Winnebago expects Class B to be back to full strength by the end of fiscal fourth quarter. Segment adjusted EBITDA fell 97% to $381,000 as the chassis shortage caused mix and volume pressure which, along with discounting in the market, could not be overcome. May industry RV wholesale data is not out yet, but March and April saw double-digit year-over-year declines for the industry (26% in March and 15% in April), so we expect Grand Design to continue to lead the way for Winnebago.
Winnebago Industries is a manufacturer with a portfolio of recreation vehicles and marine products used primarily in leisure travel and outdoor recreation activities. The company's reportable segments include: Towable, which is comprised of products which are not motorized and are generally towed by another vehicle as well as other related manufactured products and services; and Motorhome, which is comprised of products that include a motorized chassis as well as other related manufactured products and services. The company's subsidiary, Chris-Craft USA, Inc., manufactures and sells boats in the recreational powerboat industry through a network of independent authorized dealers.
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