The Federal Reserve reported on Wednesday that the net worth of the typical U.S. household increased by 37% between 2020 and 2022. The median household net worth at the end of last year was nearly $193,000, adjusted for inflation.
“The broad-based wealth increase helps explain the surprising durability of the U.S. economy this year and the consumer spending that powers about two-thirds of it. For at least a year, economists have been warning of a forthcoming recession. Yet the economy has kept chugging along,” stated the Associated Press.
Not surprisingly, the Fed’s report revealed that the wealthiest one-tenth of U.S. households saw average incomes rise by 15% over the three years, 5x the 3% median growth rate.
Also, Winnebago (WGO) reported its Q4 2023 results on Wednesday. Most notably, it earned $1.59 a share on an adjusted basis, 47% less than a year ago. On the top line, its revenues in the quarter were $784 million, down 34% from Q4 2022.
In the past month, WGO shares have lost 6% of their value leading up to today’s earnings report. American households might be wealthier today than at the end of 2019, but this optimism’s just not showing up in the RV industry.
Does this make RV-related stocks a contrarian buy? Maybe. Here’s why.
A Post-Pandemic Reality
I hate to say it, but all the business gained by the RV companies during the pandemic -- at the expense of the cruise industry -- has flipped back. To confirm my assertion, one only needs to look at a few income statements from the cruise companies compared to Winnebago, Thor Industries (THO), and Camping World Holdings (CWH).
Here’s a table that shows the most recent quarterly revenue and operating income for two cruise industry players compared with my RV trio.
| Company | Revenue | Revenue Growth | Operating Income | Operating Income Growth |
| Winnebago | $784M | -33.6% | $57.5M | -53.5% |
| Thor Industries | $2.74B | -28.3% | $149.4M | -58.1% |
| Camping World Holdings | $1.90B | -12.4% | $134.1M | -48.4% |
| Royal Caribbean (RCL) | $3.52B | 61.5% | $776.9M | 456.9% |
|
Carnival (CCL) |
$6.85B | 58.9% | $1.63B | 682.4% |
Camping (and golfing) were the things to do when you couldn't really go anywhere except for outdoor experiences where masks didn’t get in the way. Now that the world is mostly back to a pre-pandemic state, cruisers are taking some of their increased wealth and putting it toward a nice cruise.
Even the most expensive cruises are much less of a financial burden than motorhomes and RVs.
According to the RVIA (RV Industry Association), the average spent on an RV was $92.415. That includes everything from pop-up campers to travel trailers and Class A, B, and C motorhomes. In 2021, the average Class A motorhome cost $375,800, while Class B and C were $134,000 and $148,000, respectively.
With interest rates much higher than in 2021, it’s no wonder demand has fallen. The RVIA reported that RV shipments in August were 28,071, 17% lower than in August 2022. In August 2021, there were 52,819 RV shipments and 39,489 in August 2020.
The August 2021 RV shipments were the second-highest monthly number on record, behind only March 2021 at 54,291.
If you look at annual RV shipments since 2000, the year with the lowest amount shipped was 2009, when only 165,709 went out from RV manufacturers. Year-to-date through August, RV shipments are 213,421, or 26,678 per month.
At this pace, 2023 will see approximately 320,132 RVs shipped for the year. That would make it the lowest total since 2012. In October 2012, Winnebago shares were trading around $12.60.
Will Winnebago Fall Back to $12?
Anything is possible.
However, in fiscal 2012 (August year-end), Winnebago’s revenue was $582 million, with an operating profit of $9.6 million. That’s an operating margin of 1.6%. In fiscal 2023, its revenue was $4.96 billion with an 8.6% operating margin, 320 basis points less than fiscal 2022.
So, logic suggests that unless the economy goes into the tank, which today’s numbers from the Fed don’t support, I find it hard to imagine WGO shares going anywhere near that low.
Its lowest share price over the past five years was the low $20s in the March 2020 correction. The last time it was below $20 was in 2016. The business has grown considerably since.
Investors might use options to get an entry point in the high $40s.
Interestingly, the June 21/2024 $50 put has a Vol/OI ratio as I write this of 16.58. If you sell the put, the bid price of $3.40 is an annualized yield of 8.9%. With 247 days to expiration, further erosion of RV shipments could mean you’d have to buy the shares at $50. However, WGO hasn’t traded below $50 since June 2022, and then only to $45.
Your net price would be $46.60. That would be a perfect entry point.
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