Winnebago Is A Buy Before Earnings
To answer the question, are insiders buying Winnebago (NYSE: WGO) ahead of earnings, we must say yes, they are, or at least one did. Director Maria Favlana Blase bought 364 shares for a grand total of $24,053 at the end of October capping off a year in which most insiders were sellers. That said, the net sum of insider activity is less than 1.0% of the market cap with shares trading near $70 and no red flags are popping up. If anything, Ms. Blase’s purchases are a vote of confidence in a company we see as well-positioned within a very strong industry. The RV industry has doubled over the past two years and Winnebago doubled along with it.
Based on the results from competitor Thor Industries, we are expecting Winnebago to not only exceed the analyst’s expectations for flat sequential revenue but to exceed them by 1000 basis points or more. Thor Industries revenue grew by over 56% including acquisitions that, when backed out, leave organic YOY growth in the range of 40%. Considering Winnebago ended the last quarter with record high backlogs and plans to ramp production we think our own estimates may be light and that includes any impact from supply chain disruptions.
Institutions Have Been Buying Winnebago
Institutions were heavy sellers of Winnebago during the 2nd quarter of calendar 2021 but have since turned net-buyers. The two takeaways from this information are that selling occurred coincident with a test of resistance at the current all-time high and institutional ownership remains very high at over 90%. In our view, the analysts were merely trimming profits and have since been rebuilding positions in preparation for the Q3 report and what we think is going to be a very strong calendar 2022 for the company.
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The sell-side analysts are bullish on the stock. The consensus rating is a weak Buy based on 8 ratings 5 of which are Buy and 3 are Hold or Neutral. There has been no activity since the last report came out and that included one price target upgrade and one rating downgrade that have the consensus price target at $87.56. That implies about 25% of upside for the stock with shares trading near $70.50 and does not reflect the most bullish sentiment. The high price target of $115 was set by BMO following the last earnings report and implies more than 50% of upside for the stock.
Industry Data Supports A Strong Outlook For Winnebago
Recent data from the RV Industry Association and ITR Economics it is going to be very strong year for RV makers indeed. The RVIA released the results of their annual survey and the results point to strong demand for purchased and rented RVs. The results show an 18% increase of intent to take an RV, either via a rented or owned model, and the data is compounded by the latest forecast from ITR Economics. ITR Economics is now forecasting RV shipments to top 600K this year and next for a low single-digit increase next year on top of two years of 30% to 40% growth and we think these estimates will get raised again.
The Technical Outlook: Winnebago Well Supported Within Range
Shares of Winnebago have been trending in a range since earlier in 2021 when institutional selling was so heavy. That said, price action appears to be well supported at the bottom of the range and may not wait for earnings before they begin moving. The short-term moving average may act as resistance in the near term but we don’t think it will last. Not only are the RV company’s expected to do very well over the next 12 months but they are incredibly undervalued as well. Winnebago trades at only 7X its earnings estimate for the year while yielding 1.0% compared to 21X for the S&P 500. It’s also heavily shorted and so a candidate for short-covering rally or squeeze.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Winnebago Industries (WGO) | $48.10 | +0.4% | 2.83% | 160.34 | Moderate Buy | $66.63 |
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.
