Winnebago Had Blockbuster Earnings. Why the Stock Is Sagging.

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Demand remains strong for Winnebago motor homes.

Scott Olson/Getty Images

Winnebago Industries

reported strong results for its fiscal third quarter and a record backlog of orders. The news makes it clear that things are good for the maker of recreational vehicles as it emerges from the pandemic, yet the stock isn’t taking off.

The company reported record quarterly sales of $961 million, with $2.16 in adjusted earnings per share, far more than the roughly $837 million in sales and $1.77 in EPS that Wall Street expected..

Still, Winnebago (ticker: WGO) stock was down 0.8% at $65.99 in early trading, while the

S&P 500

was up about 0.2%.

Investors who view Winnebago as a reopening play may be unsure what to do now that much of the economy has gone back to normal. The stock has tripled from the lows it hit last spring, but it hasn’t done much over the past 12 months. The stock is up about 11% year to date, but is off almost 25% from its March 52-week high.

Some other recreation-related stocks have made similar moves.

Thor Industries

(THO) stock is up 5% over the past 12 months, and

LCI Industries

(LCII) has added 9%, falling far short of the 36% gain in the S&P 500 over that span.

Camping World

(CWH) stock, however, has gained about 49% over the past year. Brunswick, the boat manufacturer,  is up about 27% year to date, but down about 18% from the 52-week high the stock reached in May.

Management’s comments Wednesday should offer some encouragement to Winnebago shareholders.

“We remain focused on working with our suppliers to sustain strong levels of production and with our dealer network to replenish their inventories in the face of record backlog,” said CEO
Michael Happe
in the company’s news release. “We are also continuing to invest in our business to ensure we are best positioned to meet the persistent, elevated demand we anticipate in quarters to come.”

A record backlog and strong demand are, obviously, good things, especially at this point in the post-Covid recovery. People are still buying RVs, a safe travel option during the pandemic, even though they can go back on planes.

It is evidence that reopening plays can do well for longer than just a few months. The trends put in place by Covid-19 should end up lasting years.

Wall Street analysts appear to be more confident than investors are. The average target for the stock price is about $80, up 20% from recent levels. About 73% of analysts covering Winnebago stock rate the shares at Buy, while the average Buy-rating ratio for stocks in the S&P is about 55%,

Management scheduled a conference call at 10 a.m. Eastern time to discuss results.