On Friday, CFRA maintained its Hold rating on Winnebago Industries (NYSE:WGO) with a steady price target of $50.00. The firm's analyst cited a significant earnings miss for the fourth quarter as the primary reason for not altering the target. Winnebago reported an adjusted earnings per share (EPS) of $0.28 for the August quarter, a sharp decline from the $1.41 recorded in the same period the previous year, and considerably below the consensus estimate of $0.93.
The analyst pointed out that the lower-than-expected sales and margins led to the earnings shortfall. Winnebago's revenue dipped by 6.5% to $721 million, which was $10 million short of the consensus. The gross margin also saw a contraction of 340 basis points to 13.1%, which was 140 basis points below the consensus. The report highlighted that while Towable RV sales increased by 6% year-over-year, Motorhome volumes decreased by 3%, and Boat sales dropped by 10%.
The firm adjusted its forecast for Winnebago's future earnings, lowering the FY 25 adjusted EPS estimate to $4.05 from $6.25 and introducing an FY 26 estimate of $6.05. The revision reflects a tempered outlook, with recovery in sales and earnings anticipated to be highly dependent on the trajectory of interest rate cuts and the overall health of the consumer market.
The analysis also expressed concern over the steep decline in Winnebago's RV backlog, suggesting that higher interest rates are impacting consumer spending on discretionary items such as RVs and boats. In response to the earnings report and the analyst's comments, Winnebago's shares were trading 8% lower in the pre-market session. The price target is based on a forward P/E of 8.3x for FY 26 (August), which is a discount compared to Winnebago's 5-year mean forward P/E of 11.4x.
In other recent news, Winnebago Industries disclosed the resignation of board member Richard D. Moss, with the official date set for the upcoming annual shareholders' meeting. The company has yet to announce a successor. Despite industry challenges, Winnebago expects a gradual market improvement by Q2 of 2025, projecting a modest revenue increase and a 10% rise in adjusted EPS for fiscal 2025. In Q4, the company generated $30 million in free cash flow, returning $19 million to shareholders.
Several analyst firms have adjusted their outlook on Winnebago. BMO Capital, Truist Securities, and Baird reduced their price targets but maintained positive ratings. Meanwhile, Citi maintained its Buy rating with a steady price target of $73.00. These adjustments followed Winnebago's fourth fiscal quarter results for 2024, which did not meet expectations.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Winnebago Industries' financial position and market performance. The company's market capitalization stands at $1.72 billion, with a P/E ratio of 27.55 based on the last twelve months as of Q4 2024. This valuation metric aligns with the CFRA analyst's concerns, as InvestingPro Tips indicate that Winnebago is "Trading at a high earnings multiple."
Despite the recent earnings miss and lowered forecasts, InvestingPro Tips reveal that Winnebago "Has maintained dividend payments for 11 consecutive years" and "Has raised its dividend for 6 consecutive years." This commitment to shareholder returns is reflected in the current dividend yield of 2.32%. Additionally, the company "Operates with a moderate level of debt" and "Liquid assets exceed short term obligations," suggesting a stable financial foundation despite current challenges.
However, echoing the analyst's observations on margin contraction, an InvestingPro Tip notes that Winnebago "Suffers from weak gross profit margins." This is evident in the reported gross profit margin of 14.58% for the last twelve months as of Q4 2024.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Winnebago Industries, providing a deeper understanding of the company's financial health and market position.
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