On Monday, Benchmark maintained its Buy rating and $70.00 price target on Winnebago Industries (NYSE: NYSE:WGO), following the company's reported first-quarter loss. The recreational vehicle manufacturer posted an adjusted earnings per share (EPS) loss of $0.03, contrasting with the market consensus of a $0.19 gain.
This shortfall was attributed to a combination of declining sales and shrinking margins, influenced by factors such as the startup costs of GD Motor, increased warranty expenses, and decreased absorption leverage. According to InvestingPro data, revenue declined 14.1% in the last twelve months, with gross profit margins at 13.9%.
Despite the reported loss, Winnebago's management pointed to positive signs including an improvement in consumer confidence. This is evidenced by retail sales turning positive for the first time in over three years and inventory levels approaching a balanced 1:1 ratio, which could alleviate some pricing pressures. According to internal data, these trends are expected to continue through the end of the year.
InvestingPro analysis reveals the company maintains strong liquidity with a current ratio of 2.58, suggesting robust ability to meet short-term obligations. Subscribers can access 12 additional ProTips and comprehensive financial metrics through the Pro Research Report.
Benchmark's analysis notes that Winnebago's stock has experienced a downturn on a year-to-date, 1-year, 3-year, and 5-year basis. However, the firm believes that the current risk-reward scenario is favorable for patient investors. They highlight a high single-digit unlevered free cash flow yield based on "depressed fundamentals."
Furthermore, Winnebago's shares are trading at 9 times Benchmark's fiscal year 2025 estimates for adjusted earnings before interest, taxes, depreciation, and amortization (AEBITDA) and 15 times adjusted EPS, which are both below the consensus estimates on the street. The expectation of a margin mean reversion and a shift towards mid-cycle performance are anticipated to drive substantial growth in adjusted EPS.
The report also underscores the stock's appeal through its nearly 3% dividend yield and current trading at 1.1 times book value. This is notably lower than the historical average of 2.4 times, with a range between 1.2 and 4.5 times, suggesting a potential for significant upside.
In other recent news, Winnebago Industries has reported a disappointing first quarter, with earnings and revenue results falling short of analyst expectations. The recreational vehicle manufacturer posted an adjusted loss of $0.03 per share, a stark contrast to the anticipated earnings of $0.22 per share. Revenue also saw a decrease, down by 18% year-over-year to $625.6 million, underperforming the projected $690.94 million.
KeyBanc, maintaining its Sector Weight rating on Winnebago, noted that the earnings miss was broader than anticipated. Despite the underperformance, Winnebago has updated its full-year earnings guidance, now projecting an adjusted EPS of $3.10 to $4.40, while keeping its revenue forecast between $2.9 billion and $3.2 billion.
On a positive note, Winnebago's management highlighted cleaner inventory levels and an uptick in retail sales starting from October as signs of a potential market recovery in the second half of fiscal 2025. In line with its capital allocation strategy, the company repurchased $30 million of shares during the quarter.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.