WGO - Embedded Expectations Analysis - 2020 04 28
ï€ Winnebago Industries, Inc. (WGO:USA) currently trades below corporate averages relative to Uniform earnings, with a 14.5x Uniform P/E, implying bearish expectations for the firm. Although management's concerns about supply chain disruptions, growth, and dealer inventory suggest the potential for near-term headwinds, given the firm's long-term macro tailwinds and extension into higher profitability business lines, markets are overly pessimistic and long-term equity upside remains warranted for WGOï€ Specifically, management may lack confidence in their ability to minimize supply chain disruptions, realize Newmar synergies, and sustain revenue, operating income, and EBITDA growth. In addition, they may have concerns about the operations of their suppliers in COVID-19 affected countries, the ability of dealers to stay open, and dealer inventory levels. Moreover, they may be exaggerating the strength of their balance sheet and liquidity position, and they may lack confidence in their ability to reduce variable and corporate costs. Additionally, they may lack confidence in their ability to sustain Class B motorhome and Newmar-driven market share gains, and they may be downplaying concerns about changes to the competitive landscape following the COVID-19 pandemic
ï€ Although management's concerns about supply chain disruptions, growth, and dealer inventory suggest the potential for near-term headwinds, given the firm's long-term macro tailwinds and extension into higher profitability business lines, long-term equity upside remains warranted for WGO
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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