The world’s largest recreational vehicle manufacturer Thor Industries (THO) missed on earnings estimates for the third quarter, while revenue surpassed expectations, driven by improved sales in its Towable and Motorized segments. However, margins took a hit for the quarter, declining to 14.1% from 14.6% a year ago, impacted by increasing labor and material costs as well as higher warranty expenses.
Profit benefited from the Jobs Act enacted last year, coming in at $133.8 million, jumping 20.2% year-over-year. Thor, which owns about 50% of the towables market share and a tad more than 40% of the motorhomes share, reported sales of $2.25 billion for the quarter, increasing 11.7% from a year ago. The company’s Towable segment helped Thor report record sales, with double-digit increases in its sales, while bringing down expenses.
Motorized segment reported single-digit increases in sales, offset by lower margins. However, the company reported a 12.2% decline in its backlog due to capacity additions and better delivery times and expects the motorized recreational vehicle backlog to return to normalized levels going forward.
“Our third quarter results reflect another period of solid growth of both sales and earnings. While labor costs have moderated, we are experiencing inflationary price increases in certain raw material and commodity-based components due in large part to the headwinds created by the announcement and implementation of the steel and aluminum tariffs and other regulatory actions, as well as higher warranty costs,” said Bob Martin, Thor CEO.
Looking into the fourth quarter of 2018, Thor expects to see tougher comparisons on the top and bottom line results. Additionally, the company expects to bring wholesale and retail growth rates closer to parity by the end of 2018.
As for the long-term outlook, the company is seeing a strengthening trend of many new customers at a younger age adopting the recreational vehicle lifestyle and expects this growth to be sustainable in the long run.
Thor stock hasn’t had a positive trend through the year, though it touched an all-time high of $155 in January 2018. The stock fell 1.7% over the last one year, while plunged more than 36% since January. Post the earnings release the stock fell about 4%.