WGO - Embedded Expectations Analysis - 2019 10 29
Winnebago Industries (WGO:USA) currently trades below corporate averages relative to Uniform Earnings, with a 12.0x Uniform P/E. At these levels, markets have overly bearish expectations for the firm, and while management's concerns about margin and volume headwinds, competition, and the promotional environment suggest the potential for near-term headwinds, the firm's leadership position in its space and overly bearish market expectations suggest longer-term upside remains warranted.Specifically, management appears concerned about ongoing headwinds to their sales volume, motorhome revenue, and gross margin. Furthermore, they appear concerned about the sustainability of recent input cost growth and promotional environment, and they may be concerned about the value of their position in outdoor lifestyle markets adjacent to their core markets. Finally, they may lack confidence in their ability to gain market share and differentiate from their competition based on quality.
That said, even with near-term headwinds suggested by management's pessimism, long-term outperformance remains warranted at current valuations, as WGO's recent profitability improvements prove to be sustainable.
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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