Time to Hit the Road: the Great American RV Market Is Back

040313_PC_clarkIt’s always been a dream of mine to drive around the U.S. and Canada in a recreational vehicle (RV) or some sort of livable automobile, perhaps a converted van, like a Sprinter. I’ve spent enough time in big cities to know that I don’t particularly like big cities. I want to see landscapes, from Texas to California, Alaska and the Yukon, the Maritimes and the Southern States. It might sound a little corny to some, but driving rural North America in an RV sounds like heaven to me.

Business in the RV industry is getting better—a lot better. There’s continued talk in the media about a recession, but it’s not in this industry. On the stock market, many manufacturers aren’t back to their all-time highs, but they are getting close. The stock market performances of Thor Industries, Inc. (NYSE/THO) and Winnebago Industries, Inc. (NYSE/WGO) have been great over the last 12 months, as these companies are reporting that business is getting better—and so are earnings.

According to Winnebago, its sales for the 14 weeks ended December 1, 2012 grew 47% to $193.6 million (one extra week compared to the first fiscal quarter of 2012). Earnings grew significantly to $7.4 million, or $0.26 per diluted share, compared to earnings of only $1.0 million, or $0.04 per diluted share. Management says that the company is experiencing “robust demand,” and because of this, the company is reducing sales incentives, which should help margins.

Another company that’s been doing very well lately on the stock market and operationally is Drew Industries Incorporated (NYSE/DW) out of White Plains, NY. This company is a parts supplier to the RV and modular home industry, and the company’s fourth-quarter earnings grew 39% to $5.7 million (excluding a one-time charge), while total sales jumped 25% to $200 million. The company’s RV-specific business saw a 31% improvement in sales during the fourth quarter of 2012. On the stock market, Drew Industries just hit a new 52-week high.



Chart courtesy of www.StockCharts.com

As a stock market investor, you can’t let the doom and gloom in the media get to you. Countless old economy companies are experiencing solid business conditions, with good growth in revenues and earnings. (See “Great Old Economy Business That Isn’t Full of Hot Air.”) The RV industry is just the latest old economy industry that’s reporting a big improvement in consumer demand.

Realistically, the biggest problem facing the U.S. economy continues to be with unemployment. If you are unemployed, underemployed, or unskilled, it is extremely difficult to get ahead. You don’t care about the stock market or corporate earnings. But going by the numbers, many old economy industries are doing pretty well, and many are hiring new skilled workers.

Corporate earnings aren’t robust, but they certainly aren’t bad either. I think investor sentiment is still positive enough for the stock market to tick a little higher until first-quarter earnings season begins, but any big moves are unlikely.

The stock market is paying close attention to Ben Bernanke’s every word, but it’s seemingly letting go of the actions—or inactions—of policymakers. The market was previously trading off oil prices, but investors have let that go as well. Now the stock market is trading on a little bit of hope—hope that the modest fourth-quarter revenue and earnings growth will last. I think it will, and I’m not nearly as gloomy about the prospects for the U.S. economy as others.