Winnebago's 2nd Quarter Results Include Improved Margins

Company has steady improvement in RV market

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Winnebago Industries Inc. (WGO, Financial) is a leading U.S. manufacturer of recreation vehicles, which are used primarily in leisure travel and outdoor recreation activities. The company builds quality motor homes, travel trailers and fifth wheel products.Â

Winnebago has been recognized by Statistical Surveys Inc. as the top-selling motorhome brand every year since 1974.Â

The company recently reported second quarter results and is poised to grow. Gross margin improved year over year in the second quarter. Improved product mix and the realization of cost-saving benefits related to the company’s strategic sourcing initiatives contributed to the improved margins. The company is focused on creating sustainable, increased levels of manufacturing output.

Second quarter results

Revenues during the 2016 second quarter were $225.7 million, down from $234.5 million in the prior year quarter.

Operating income during the second quarter was $13.5 million, up 13% from $11.9 million in the prior year quarter.

Fiscal 2016 second quarter net income was $9.4 million, or 35 cents per diluted share, up 15.5% from the prior year quarter.

Strong attributes of second quarter

  • Improved profitability
  • Strong continued momentum of Towables business
  • Improved gross margin

Focus

  • Product development
  • Global expansion
  • Customer satisfaction
  • New product introductions

Change in management

The company announced the appointment of Ashis Bhattacharya to the position of vice president of Strategic Planning and Development, effective June 1. He will be responsible for establishing, developing and facilitating strategic planning and new business development processes at Winnebago Industries.

Initiatives

During 2015 the company made several strategic investments to support operations and strengthen its foundation for success well into the future. It is making several strategic investments for its future and revising strategy in certain areas. It has initiated a strategic sourcing project, which will standardize its purchasing processes, optimize supplier relationships and improve its current sourcing methodologies with the goal to reduce costs in these areas.

The company is also enhancing its competitive position over the long term, while also generating profitability, growing operating cash flow and maintaining a solid balance sheet. In 2016, it has planned the exit of bus and aluminum extrusion operations, in the hope of increasing profitability and add production capacity for our higher margin motorhome business

On a concluding note

The company is witnessing steady improvement in the RV market. There are positive long-term trends in the industry. The RV lifestyle continues to remain popular with consumers and the company targets prime age audience. Winnebago's management successfully managed the company through the recession and has a healthy balance sheet and no debt.

As a leader in RV manufacturing technology, it has a continued commitment to be in the forefront of new product development. It introduced exciting new products that are gaining market share in the North American market and will continue to strive for excellence as an RV industry leader.

The company is doing well as of now and has more upside attached to it. I would recommend this company as a buy, as it is expected to create shareholder returns.

Disclosure: I do not hold any position in the company.