LCI Industries Gains Capped By Insider Sales
LCI Industries (NASDAQ: LCII) is one of the best-positioned companies in the market today. The company makes OEM and after-market parts for the RV and adjacent industries and demand for products is robust. Sales in the RV industry are going to top 30% this year after rising solid double-digits in 2020 as well and that is driving a massive manufacturing cycle among the RV companies. By our estimates, it will be late in 2022 when the RV manufacturers catch up with the backlog and then expect another several quarters of production to catch up on inventory for dealer lots. What this means for LCI Industries is high-double-digit growth and record revenues and yet shares are not responding.
Insiders at LCI Industries have been selling shares for the last year and a half or so and have been capping the gains. The good news is the selling is broad-based among execs and judiciously done with shares trading at or near the stock’s historic high levels. In that light, we’d be surprised if execs weren’t taking advantage of high prices but the fact remains price action is having a hard time getting over that hurdle. Selling appears to have slowed, however, so we may see price action begin to move higher again. The institutions love this stock and have been scooping it up even while insiders trim their positions. According to data from Insidertrades.com, insiders and institutions own nearly 100% of this stock and we think that will fuel higher prices down the road.
LCI Industries Steady After Mixed Results
LCI Industries had a fantastic quarter and set another company record. The problem is that revenue growth was offset by narrowing margins that more than made up the difference. The company reported $1.17 billion in net consolidated revenue which is up 41.4% over last year and beat the consensus by 830 basis points. The strength was driven by demand in OEM RV, OEM Adjacent, and Aftermarket which all saw double-digit growth. Adjacent Industries was strongest at up 55% followed by a 43% increase in OEM RV and an 18% increase in the Aftermarket segment.
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The bad news is in the margin. The company experienced significant margin erosion at the gross level and an increase in working capital and inventory cut into the operating margin as well. At the gross level, the margin contracted 525 basis points while at the operating level margin shrank by 400 basis points. This left the earnings roughly in line with the consensus despite the revenue strength and adjusted earnings fell short of consensus.
The company did not give any guidance but the business update is very bullish. The company says ramping production helped drive October sales to a gain of 55% over last year. If this trend continues and we see no reason why it won’t the company should easily beat the Q4 and full-year consensus for revenue. The question is how badly will inflation cut into the bottom line?
The Technical Outlook: Rangebound LCI Industries Goes Nowhere
Price action in LCI Industries was trading near the middle of its recent trading range going into the report and is still there now. Price action fell slightly in the wake of the report and is testing support at the middle of the range. Support is still evident at the midpoint of the range so prices may continue moving sideways in the near term. Longer-term, we would expect to see this stock move higher but there is resistance at the top of the range. If insiders resume their selling at these levels price action could remain rangebound indefinitely. If, however, the stock is able to move up above the $150 level it could continue on to the $175 region.
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
