Bearish stock to watch: Thor Industries, Inc. (NYSE: THO)

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Thor Industries, Inc. (NYSE: THO) stock plunged 12.96% on 20th September 2018 and continues its bearish momentum on 21st September, falling over 2.3% (as of 12:39 PM GMT-4; Source: Google finance) after the company posted weaker-than-expected profit for its fiscal fourth quarter as it worked to reduce dealer inventories and grappled with higher costs. The company has reduced production levels, combined with higher promotional costs and solid retail demand, have improved the position of the dealers’ inventories as they enter the new model year and prepare for the upcoming Dealer Open House. Further, the labor costs remained elevated and the company faced higher warranty costs, as well as inflationary price increases in raw materials and commodities, mostly due the steel and aluminum tariffs imposed by the administration of President Donald Trump. Looking ahead, the company is expecting tougher comparisons in the first half of fiscal 2019 and expects gross margin pressure to be greater. As of July 31, 2018, the Company has $275.2 million of cash and cash equivalents. During fiscal 2018, the Company invested $138.2 million in various capital projects that support the existing businesses.

THO in the fourth quarter of FY 18 has reported the adjusted earnings per share of $1.67, beating the analysts’ estimates for the adjusted earnings per share of $2.03. The company had reported the adjusted revenue growth of 3.1 percent to $1.87 billion in the fourth quarter of FY 18, beating the analysts’ estimates for revenue of $1.85 billion. The gross profit decreased 18.9% to $244.4 million, and income before taxes decreased 29.3% to $124.3 million

Moreover, Towable RV sales were $1.41 billion for the fourth quarter, comparable to $1.41 billion in the prior-year period. Motorized RV sales were $421.3 million for the fourth quarter, down 13.2% from $485.2 million in the prior-year period.

Meanwhile, THO has entered into a definitive agreement to acquire the Erwin Hymer Group, a German-based private company for an enterprise value of approximately €2.1 billion with purchase price to be funded with cash and equity. Equity consideration will consist of approximately 2.3 million shares of Thor. The combination creates the world’s largest global RV manufacturer with number one market share in North America and Europe, and establishes a global sales and production footprint for the Company. Upon closing, the company will become the number one manufacturer in North America and the number one manufacturer in Europe with total fiscal 2018 revenues of approximately $11 billion.

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