Thor Earnings: To Us, Guidance Cut Is Not as Bad as It May Seem

Thor’s stock fell by over 14% during March 6 trading after the firm’s fiscal 2024 second quarter saw management lower full-year guidance. We don’t see a permanent demand problem for the recreational vehicle industry in North America, we instead see the guidance change resulting from a delay in an inevitable inventory restocking, so we are leaving our fair value estimate in place. Management expected a second-half fiscal 2024 recovery in dealer demand, but that timing is now later in fiscal 2024 due to high interest rates and dealers remaining cautious on accumulating inventory when they still have 2023 model year product to sell. Inventories are low per Thor and 2025 model year product comes out in July, so we don’t see dealers keeping inventory low forever and we think high interest rates, rather than a lack of consumer demand, are delaying an inventory rebuild. Management is combating these dealer fears with more incentive spending, especially in motorhomes, but this means full-year gross margin is now expected to be 14.0%-14.5%, down from 14.5%-15%. That change, along with about $500 million less revenue guided, led to diluted earnings per share guidance falling to $5.00-$5.50 from $6.25-$7.25.