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Almost unnoticed, the recreational vehicle and manufactured home industry group has motored nearly to the top of the heap. The group was ranked No. 4 out of 197 groups based on six months of performance as of Tuesday’s IBD. That’s up from No. 53 just six weeks ago. There are only six companies in the group, but four of them have best-possible Composite Ratings of 99. Demographics, favorable market conditions and an economic recovery are tailwinds pushing the industry along the road to higher profits. In an investor presentation earlier this month, Thor Industries ( THO ), a major player in the RV market and one with a 99 Composite Rating, noted that although consumer sentiment has softened a tad this year, the outlook regarding personal finances is still at its best level in 10 years. Domestic vacations are viewed as safer than international travel, and lower fuel prices are making RV ownership more attractive. At the same time, baby boomers representing 24% of the population are retiring and having more time for hitting the open road. Camping in tents and cabins remains popular, and Thor noted the majority of RV owners started out as tent campers. Pricing remains competitive, the company said, but heavy discounting has been much reduced. The Recreational Vehicle Industry Association’s forecast earlier this month projected wholesale shipments increasing to 381,800 units this calendar year, a 2% improvement from 2015. On March 7, Thor reported fiscal Q2 earnings of 97 cents a share, well above estimates of 62 cents. That marked a 70% increase from a year earlier. The next day, the stock gapped up and closed 6% higher on big volume. The stock is completing the right side of a year-long consolidation. Acquisitions have helped it grow. And it recently added manufacturing capacity. It makes both towable and motorized RVs, which include Class A, B and C motorhomes. It operates from 148 facilities in Indiana, Michigan, Ohio and Oregon. Patrick Industries ( PATK ) is another company in the group with a 99 Composite Rating. It makes components for RVs and manufactured housing, as well as kitchen cabinets and furniture for homes and businesses. So it’s not only riding the uptick in the RV market, but it’s also benefiting from a boom in homebuilding and home remodeling, with Patrick also offering quartz and granite countertops. Earlier this month, the company completed the acquisition of Progressive Group, which is a distributor and manufacturer for major-brand electronics, with seven locations in 16 states, primarily in the Midwest and mountain states. Patrick said the acquisition will allow it to expand its presence in the electronics distribution market. Like Thor, it has carved out an undefined base, and it’s nearly to the top of it. Also like Thor shares, the stock popped after reporting earnings Feb. 18 that were well above estimates. Winnebago Industries ( WGO ) is probably the best-known name in the group. It has a 94 Composite Rating. Earnings growth has been ragged in recent quarters, but the stock perked up after reporting earnings March 24 that were 17% higher than a year earlier. Scalper1 News
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