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

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Winnebago’s WGO 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.

Although operating income fell 53.4% year over year, the quarter’s free cash flow only fell by 5.9% on favorable working capital moves. During the quarter, the board increased the quarterly dividend by 15% to $0.31 per share and repurchased $30 million of company shares. These moves, along with a net debt/EBITDA ratio of only 0.8 times, suggest management remains confident in the near-term future of the company despite U.S. macroeconomic uncertainty.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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David Whiston

Strategist
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David Whiston, CFA, CPA, CFE, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers the automotive industry, including dealerships, parts manufacturers, and automakers. He has covered the automotive industry since joining Morningstar in 2007.

Before Morningstar, Whiston spent four years in PricewaterhouseCoopers’ New York real estate audit practice and one year in its Chicago office working on real estate acquisition due diligence.

Whiston holds a bachelor’s degree in business administration with a concentration in accounting from the University of Richmond. He also holds a master’s degree in business administration with concentrations in finance, economics, and organizational behavior from the University of Chicago Booth School of Business. He holds the Chartered Financial Analyst® designation, and he is a Certified Public Accountant and a Certified Fraud Examiner. In 2012, he ranked first in the specialty retailers and services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. He ranked first in the same industry in 2011.

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