Winnebago Earnings: Fiscal 2023 Ends With Good Free Cash Flow While Returning Cash to Shareholders

Winnebago's fiscal 2023 fourth-quarter results gave us no reason to change our fair value estimate, but we will reassess all valuation inputs once we roll our model for the 10-K. Adjusted diluted EPS of $1.59 fell 47.4% year over year but beat the Refinitiv consensus of $1.35. Revenue declined by 34.6% on lower units and more discounting as the industry continues to come off pandemic-fueled record delivery levels. We view these volume declines as dealers resetting their inventory levels to something more normal rather than a sign of an imminent recession. Management expects a "formidable" fiscal 2024 first and second quarter as dealers continue to be cautious on inventory. But management expects dealers to restock in the second half of fiscal 2024. This assumption is critical to fiscal 2024's results, so it could change if the U.S. enters recession next year, but we are encouraged to hear CEO Michael Happe say towable backlog increased sequentially for every month of the fiscal fourth quarter. Towable is the firm's largest EBITDA contributor. Total recreational vehicle deliveries fell 32.4%, with motorhomes down 51.7% and towables down 26.3%, while total RV backlog declined by 60.4% (down 13.5% sequentially) to $896.7 million. This balance is still more than double the end of fiscal 2019's RV backlog of $399.7 million. Cost-cutting efforts in towables, along with favorable warranty performance, enabled towable EBITDA margin to rise by 170 basis points to 12.5% despite a 19.7% decline in that segment's EBITDA dollars.