The stocks of Thor Drew Industries Inc. and Thor Industries Inc. soared on Wall Street today (July 31) following favorable reports by analysts.
Shares of Drew Industries Inc., which supplies components for recreational vehicles and manufactured homes, surged after the company reported its profit sank 72%, but its results easily surpassed Wall Street expectations, according to the Associated Press.
An analyst also raised his rating on the stock.
The results beat analysts’ estimates of a 6-cents-per-share loss on $93.4 million in revenue, according to a Thomson Reuters survey.
Shares rose 24.69% and closed at $19.19 per share. The stock has traded between $5.40 and $23.98 over the past 12 months, and is up 28% since the start of the year.
John Rogers, equity analyst for Janney Montgomery Scott LLC, upgraded the company’s rating to “Buy” on the stronger-than-expected results and the company’s improved outlook. He set a fair value estimate of $21, despite recent drop-offs in RV sales during a recession.
“However, we believe consumer tastes, demographics, and the economics of RV ownership will support continued growth over the long term and expect Drew to be a major beneficiary of a return to growth,” Rogers wrote in a research note. “The company has a strong balance sheet, adequate access to capital and is well-positioned to weather the current market downturn.”
Thor stock rose 11.36% to close at $23.91 a share.
Citigroup added Thor to its Top Five Picks Live listing, prompting the rally on Wall Street, and had this to say in notes to investors:
- Well Positioned Within L-T Growth Industry – We believe that underlying RV demand is intact (sweet spot from demographic perspective), despite near-tern cyclical pressures. We also believe Thoris very well positioned. Dealers view Thor as a vendor of choice, given turmoil w/other major competitors. Fleetwood and Monaco are under new ownership after having gone bankrupt, and dealers we speak with are still reluctant to reorder products from them.
- Improved Cost Structure – Cost cutting will lower the cost structure and when growth returns, Thor should be able to achieve normalized earnings per share (EPS) of $3 (assuming a full economic recovery).
- Trends Are Getting “Less Bad” – Pent up demand is greater than in any other leisure sector as retail sales had been declining since March 2005 for motorhomes. While retail sales are still declining in the 30% range, trends have been getting “less bad” over the last few months. We think RV backlogs (leading indicator of future sales growth) may have improved to down only 10% from down (23%) last quarter.
- Adding to Top Picks Live and Raising Target Price/Estimates – Given our improved sales and margin outlook, we are raising our ’09-’11 EPS by 11c, 46c, and 29c, respectively. Given our higher estimates, we are raising our target price by $2 to $30. We are also adding Thor to Top Picks Live.