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Winnebago benefits from two big tailwinds

Ines Ferré
·Markets Reporter
·2 min read

Recreational vehicle company Winnebago Industries (WGO) “is in good shape for the recession” as it benefits from two key tailwinds amid the coronavirus pandemic, says one analyst.

For starters, people are avoiding planes these days, but they still want to travel and be outdoors.

RV demand is “booming in the U.S. due to COVID-19’s impact on air travel, leading many Americans to use an RV vacation as a substitute,” Morningstar analyst David Whiston wrote in a note to investors.

Additionally, campers are skewing on the younger side. “Millennial and Gen X campers are 81% of new U.S. campers, so Winnebago has plenty of runway with younger consumers if it executes right,” wrote Whiston.

“We think Winnebago's brand equity gives it a good shot at capitalizing on these trends,” he added.

Winnebego and its main competitors, Thor (THO) and Forest River, currently hold 80% of the North American motor home market.

FILE - In this Dec. 12, 2010 file photo, Winnebago vehicles for rent and sale are on display at a dealership in San Jose, Calif.  The Recreation Vehicle Industry Association on Tuesday, Dec. 2, 2014 said that recreational vehicle shipments from manufacturers to dealers are expected to increase by nearly 4 percent to 361,400 units in 2015. (AP Photo/Paul Sakuma, File)
(AP Photo/Paul Sakuma, File)

Winnebego’s fiscal third-quarter 2020 results were severely impacted, particularly in its towable segment by a full manufacturing shutdown for the entire month of April due to COVID-19. However the analyst believes the company’s strong balance sheet “should allow the firm to persevere through economic turmoil.”

“The firm finished the quarter with $152.5 million of cash and full availability on its $193 million credit line. Thus, we are not worried about the firm’ s health and believe the dividend is safe,” said Whiston.

[To read the full report from Morningstar, sign up for Yahoo Finance Premium. Click here to start your free trial and step up your investing.]

One concern is elevated unemployment numbers likely to remain high into 2021 potentially affecting RV demand. However the analyst points to the company’s robust backlog.

“For now, demand looks excellent with motorhome backlog up 99.2% year over year and towable backlog up 86.7%,”wrote Whiston. “Winnebago is in good shape for the recession.”

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Ines covers the U.S. stock market from the floor of the New York Exchange. Follow her on Twitter at @ines_ferre

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