Winnebago's First Quarter Hit by Industry's Towable Woes, but Earnings Still Strong

Winnebago reported an excellent fiscal 2023 first quarter, given the macroeconomic environment and declining year-over-year figures from a very tough comparable with the first quarter of fiscal 2022. We are maintaining our fair value estimate. Adjusted diluted EPS of $2.07 fell 41% year over year but far surpassed the Refinitiv consensus of $1.82. Revenue fell 17.6% as a 47% decline in towable revenue more than offset 10% growth in the motorhome segment and 66% growth in marine. Winnebago passed through price increases for higher input costs, which helped mitigate a 49% decline in recreational vehicle unit sales split as 56% towable and 8% motorhome. Despite revenue growth, free cash flow fell 94% to $2.1 million as higher input costs and $50 million of lost revenue from the Mercedes chassis recall disclosed last month ate into cash flow. CEO Michael Happe said that across the towable industry, dealers don’t need much more inventory, which may explain Winnebago’s stock falling on Dec. 16. Towable in the prior-year quarter was about two thirds of adjusted EBITDA but only just over one third this quarter, by our calculation. Motorhome backlog fell 47% while towable declined 79% and marine grew 21%.