Bull of the Day: Thor Industries (THO)

Thor Industries (THO) is a Zacks Rank #1 (Strong Buy) that makes a wide range of recreational vehicles (RVs). The company manufactures in Indiana and Ohio and sells its products through independent dealers in the U.S. and Canada.  

The stock has been hot of late as the appeal of camping has increased due to COVID-19. Consumers are changing their travel habits from international to domestic and one of the best ways to do this is by camper or RV.   

Travel Has Changed

There is a lot of fear surrounding travel at the moment as COVID-19 continues to be a problem around the globe. Because the U.S. has one of the highest case counts, some countries have issued quarantine rules for travelers. This isn’t appealing for someone on vacation so we are seeing a big reduction in international travel.

Hotels and planes aren’t appealing to people yet and will likely be avoided until a vaccine comes. One of the best ways to travel the country is by camper, exploring what the campgrounds of America have to offer. The American consumer shifted with that thought in mind and the demand for RV’s has shot higher over the last few months.  

Earnings Beat

The stock was crushed during the March panic, making a low of $30 a share. However, once investors realized how much traveling would be restricted to the country, the stock bounced quickly. After a rally of over 200%, we saw the earnings come out with a 200% beat on EPS.  

Thor saw +$0.43 v a negative $0.43 expected. The company also beat on revenues, seeing $1.68 billion v the $1.42 expected. Moreover, Thor said that Q4 sales improved and they have a backlog for May.

As dealers reopened their dealerships, consumer demand has increased. On the call, the CFO had some comments on the current environment: “Today, market indicators in North America are increasingly positive. Every North American dealer I have spoken to in the last few weeks has been very excited about the pace at which sales are picking up.”

This change in the RV market has created a hope that the stock can return to the highs seen in 2018. The company missed earnings five quarters in a row, so these numbers are very promising.

Estimates Rising

Because the quarter was so impressive analysts were forced to take numbers higher. We now see rising estimates across all-time frames over the last month. For next quarter, analyst have raised estimates from $0.95 to $1.46, a hike of 54%. For the current year, we see a 76% hike, from $1.88 to $3.32,

The Technical Take

The move lower in March created a massive opportunity for long-term investors. However, those looking to enter the stock now might think twice after the big move higher. Let’s take a look at some levels to enter.

The 200-day is at $71 and not likely to come anytime soon. The 50-day is $90 and could print on a market selloff. With that level, there is a 61.8% Fibonacci level at $85. The $100 level has been supported and a move back over $110 would be bullish. The stock has Fib targets at $132 and $151.

In Summary

The way Americans travel has changed due to the pandemic. While this hopefully won’t last forever, the current situation makes THO a stock to own as camping gains popularity.

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