RV industry feeling 'relatively quick impact' of high gas prices: Analyst

Rebecca Chen
·Reporter
·2 min read
35

Despite record sales in 2021, the RV industry is facing some roadblocks. Key industry companies - Camping World Holdings (CWH), Thor Industries (THO), and Winnebago Industries (WGO), have seen shares drop as inflation and gasoline prices soar. And this year’s total vehicle shipments are forecasted to fall 8.4% compared to 2021, according to RV Industry Association’s May 2022 Market Report.

“It’s a compounding effect of inflation, whether it’s gas, or milk, or heating, or rent,” Bret Jordan, managing director at Jefferies, told Yahoo Finance Live (video above). “All of this is sort of draining the consumer’s liquidity. And, obviously, when you’re at the pump and you’re putting $100 into your tank when it used to be $25 or $30, it really strikes home."

Jordan discussed industry volatility, near-future market, and also suggested that the RV stocks are "dead money" as data points in the automotive and RV industry indicated a recession in 2023 and six months beyond.

“They [RV stocks] are trading at very low optical valuations in the sense that five plus times earnings on current year would seem to be extraordinarily cheap. But current year earnings are, in Winnebago’s case, four times with earned in 2019,” Jordan said. “So they are arguably over-earning. And until people can make a decision as to how big the downturn is and what the normalized earning rate is going to be, it seems a bit dead money.”

He pointed out that a recent AAA survey found that the amount of travel expected for the remainder of 2022 is at a 40-year low. Only 36% of survey respondents believe they will take a vacation in the next six months (compared to 40% during the summer of 2019, when the average gas price hovered around $2.76 per gallon.)

Although the COVID spurred a surge in RV popularity and boosted sales and market earnings, the pandemic mainly brought in new customers interested in relatively less expensive models in the United States. “You certainly see a migration to lower price point trailers. A lot of that is likely driven by new entrants to the RV Space,” Jordan explained. “So people testing the water are coming into the lower price point items.”

Investors’ lackluster confidence might lift as companies are exploring electric powertrain systems in RVs, Jordan added. Both Thor and Winnebago are looking at ways to electrify their products. Thor is experimenting with regenerative electrical systems, and Winnebago is working on electric motor homes. However, current RV technology still faces the issue of not generating enough energy to support long-distance driving, “These vehicles are relatively large, not particularly aerodynamic,” said Jordan about the future of electric RVs.

Rebecca Chen is a writer and reporter at Yahoo Finance. Follow her on Twitter @RebeccaChenP

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