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Soft North American Markets to Hurt Thor's (THO) Q1 Earnings

Zacks Equity Research

Thor Industries, Inc. THO is scheduled to report first-quarter fiscal 2020 results on Dec 9, before the opening bell.

In the last reported quarter, the company’s earnings surpassed the Zacks Consensus Estimate by 14.9% and grew 1.8% on a year-over-year basis. However, its revenues missed the consensus mark by 1.3%.

Nonetheless, the top line improved 23.3% year over year on the back of growth in the European RV segment. However, decline in North American markets impacted the results.

Trend in Estimate Revision

The Zacks Consensus Estimate for the to-be-reported quarter’s earnings per share has moved 0.8% north over the past seven days to $1.23. This indicates a 3.9% decrease from the year-ago earnings of $1.28 per share. The consensus estimate for revenues is $2.19 billion, suggesting a 25% year-over-year improvement.

Thor Industries, Inc. Price and EPS Surprise

 

Thor Industries, Inc. Price and EPS Surprise

Thor Industries, Inc. price-eps-surprise | Thor Industries, Inc. Quote

Factors to Note

Softness in unit demand and lower margins are expected to have weighed on Thor’s profitability in the quarter to be reported. The company has been experiencing softness in demand, particularly in the North American Towable RV and North American Motorized RV segments. In the North American market, it has been witnessing lower unit volume.

The company has been plagued with various incremental costs and expenses like fixed overhead percentage resulting from reduced sales, negative impact of higher relative sales discounts and promotions, along with acquisition-related costs. Continuous cost pressure is a cause of concern for Thor, which shares space with Skyline Champion Corp. SKY and Winnebago Industries, Inc. WGO in the industry.

The company’s margins have been under pressure due to the above-mentioned factors. Although it is gradually showing an improvement, the negative impact of the aforementioned factors is expected to reflect on the to-be-reported quarter’s results.

Nonetheless, the company’s acquisition of Germany-based notable RV manufacturer Erwin Hymer Group within the European RV segment is likely to have aided top-line growth in the fiscal first quarter.

What the Zacks Model Says

Our proven model predicts an earnings beat for Thor this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +4.88%. You may uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: It currently carries a Zacks Rank #3.

Stock With Favorable Combination

Here is a construction stock that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat in the upcoming releases:

KB Home KBH has an Earnings ESP of +1.75% and a Zacks Rank #3.

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Thor Industries, Inc. (THO) : Free Stock Analysis Report
 
Skyline Corporation (SKY) : Free Stock Analysis Report
 
Winnebago Industries, Inc. (WGO) : Free Stock Analysis Report
 
KB Home (KBH) : Free Stock Analysis Report
 
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