RV Manufacturer Winnebago (NYSE:WGO) missed Wall Street’s revenue expectations in Q4 CY2024, with sales falling 18% year on year to $625.6 million. On the other hand, the company’s full-year revenue guidance of $3.05 billion at the midpoint came in 1.9% above analysts’ estimates. Its non-GAAP loss of $0.03 per share was significantly below analysts’ consensus estimates.

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CEO Commentary“As expected, the RV and marine operating environment remained challenging in the first quarter, marked by subdued consumer demand and a cautious dealer network reluctant to make significant commitments on new orders ahead of the historically slow winter season,” said Michael Happe, President and Chief Executive Officer of Winnebago Industries.

Company Overview

Created to provide high-quality, affordable RVs to the post-war American family, Winnebago (NYSE:WGO) is a manufacturer of recreational vehicles, providing a range of motorhomes, travel trailers, and fifth-wheel products for outdoor and adventure lifestyles.

Automobile Manufacturing

Much capital investment and technical know-how are needed to manufacture functional, safe, and aesthetically pleasing automobiles for the mass market. Barriers to entry are therefore high, and auto manufacturers with economies of scale can boast strong economic moats. However, this doesn’t insulate them from new entrants, as electric vehicles (EVs) have entered the market and are upending it. This has forced established manufacturers to not only contend with emerging EV-first competitors but also decide how much they want to invest in these disruptive technologies, which will likely cannibalize their legacy offerings.

Sales Growth

A company’s long-term sales performance signals its overall quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Regrettably, Winnebago’s sales grew at a mediocre 6.4% compounded annual growth rate over the last five years. This was below our standard for the industrials sector and is a poor baseline for our analysis.

We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Winnebago’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 22.8% annually. Winnebago isn’t alone in its struggles as the Automobile Manufacturing industry experienced a cyclical downturn, with many similar businesses observing lower sales at this time.

We can dig further into the company’s revenue dynamics by analyzing its most important segments, Motorhomes and Towables, which are 43.4% and 40.6% of revenue. Over the last two years, Winnebago’s Motorhomes revenue (homes on wheels) averaged 20% year-on-year declines while its Towables revenue (non-motorized vehicles) averaged 22.7% declines.

This quarter, Winnebago missed Wall Street’s estimates and reported a rather uninspiring 18% year-on-year revenue decline, generating $625.6 million of revenue.

Looking ahead, sell-side analysts expect revenue to grow 7.6% over the next 12 months, an improvement versus the last two years. This projection is above the sector average and implies its newer products and services will catalyze better top-line performance.

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Operating Margin

Winnebago has done a decent job managing its cost base over the last five years. The company has produced an average operating margin of 8.5%, higher than the broader industrials sector.

Analyzing the trend in its profitability, Winnebago’s operating margin decreased by 4.7 percentage points over the last five years. Even though its historical margin is high, shareholders will want to see Winnebago become more profitable in the future.

In Q4, Winnebago’s breakeven margin was down 5.3 percentage points year on year. Since Winnebago’s operating margin decreased more than its gross margin, we can assume it was recently less efficient because expenses such as marketing, R&D, and administrative overhead increased.

Earnings Per Share

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Sadly for Winnebago, its EPS declined by 8% annually over the last five years while its revenue grew by 6.4%. This tells us the company became less profitable on a per-share basis as it expanded.

Diving into the nuances of Winnebago’s earnings can give us a better understanding of its performance. As we mentioned earlier, Winnebago’s operating margin declined by 4.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its lower earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

In Q4, Winnebago reported EPS at negative $0.03, down from $0.95 in the same quarter last year. This print missed analysts’ estimates. Over the next 12 months, Wall Street expects Winnebago’s full-year EPS of $2.28 to grow 72.5%.

Key Takeaways from Winnebago’s Q4 Results

Revenue and EPS both missed, which makes for a bad quarter. Guidance was better, though, with full-year EPS above expectations. The misses in the quarter are weighing on shares. The stock traded down 4.4% to $49.65 immediately after reporting.

The latest quarter from Winnebago’s wasn’t that good. One earnings report doesn’t define a company’s quality, though, so let’s explore whether the stock is a buy at the current price. When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.