baird_new_logoEditor’s Note: Following are excerpts from the latest investor advice sent out by Robert W. Baird & Co. after Thor Industris Inc. reported preliminary quarterly results on Tuesday (Nov. 3):

Maintain Neutral rating. Thor reported lower-than-expected preliminary revenue and a strong backlog. Fundamentals are improving, especially in the towable market, and dealers are beginning to replenish inventories at more normal rates, driving positive industry shipment growth in recent months. Thor is positioned well, but we believe the cyclical recovery is fully priced at these levels.

Summary

Revenue below forecast. Thor reported preliminary sales for the October quarter, following its customary process. Sales increased 14% to $501 million – lower than our $526 million estimate, but in line with the $506 million consensus. RV sales grew 18% to $389 million – below our $411 million estimate. Bus sales increased 3% to $112 million – just short of our $115 million estimate.

Inventory bottom. Strong backlog and positive industry wholesale shipments make us confident dealer inventories have bottomed and the destocking trend has run its course – especially in the towable market. At Thor, the RV backlog increased 150% YOY to $315 million – up sequentially from $298 million last quarter. The RV backlog represents 120% of our next-quarter revenue estimate – a relatively high percentage by historical standards.

Outlook. As the RV cycle turns, Thor is positioned well – accumulating cash, cutting costs, and gaining share. We believe the destocking trend has run its course and expect healthier fundamentals (better retail demand and dealer orders) to yield better returns.

Estimates

We lowered our Q1 earnings per share (EPS) estimate to $0.38 from $0.41 on the lower-than-expected revenue. We lowered our F2010 EPS estimate to $1.48 from $1.50. We lowered our F2011 EPS estimate to $1.67 from $1.70.