Winnebago Industries, Inc. (WGO), Thor Industries, Inc. (THO): Made in America: RVs

The great American pastime of hitting the open road with family and friends hit a speed bump during the financial crisis, as discretionary incomes fell sharply. The leading manufacturers of RVs, like Winnebago Industries, Inc. (NYSE:WGO) and Thor Industries, Inc. (NYSE:THO), were also hit hard and many of their smaller competitors made the lonely trip to bankruptcy court. Fortunately, the federal government’s stimulus programs have helped the industry prosper again and post a 14% increase in unit sales during 2012, according to the Recreational Vehicle Industry Association (RVIA). So, which players are now worth a look from investors?

Founded in 1958, Winnebago Industries, Inc. (NYSE:WGO) sells its iconic recreational vehicles through a network of over 460 dealers throughout the U.S. and Canada. Winnebago controls approximately 20% of the traditional motor coach market and it moved into the towable coach segment with its 2010 purchase of competitor Sunnybrook. The company’s very conservative balance sheet enabled it to survive the industry’s deep recession relatively unscathed, while allowing it to continue investing in new product development.

In its latest fiscal year, Winnebago Industries, Inc. (NYSE:WGO) posted mixed results, with a 17% increase in revenues and a 16% decline in operating income. The company’s sales benefited from a sharp increase in unit volume, as well as improved pricing as its customers opted for more expensive models. However, Winnebago’s razor-thin operating margin, 1.6% in FY2012, was negatively impacted by higher commodity costs and aggressive discounting of its products in the first half of the year.

Looking ahead, Winnebago Industries, Inc. (NYSE:WGO)’s prospects are strong as the industry currently expects an 8% unit sales increase in 2013. In addition, the company has improved its competitive position by expanding into the lower-priced, towable coach market. With a year-over-year doubling in the value of its backlog as of August 2012, Winnebago Industries, Inc. (NYSE:WGO) should be able to earn solid future gains in profitability as it leverages its manufacturing operations.

Founded in 1980, Thor has become the country’s largest manufacturer of recreational vehicles primarily due to a long string of acquisitions, including purchases of competitors Dutchmen in 1991 and Keystone in 2001. The company has also become the leading manufacturer of small and mid-sized buses for the municipal market, a segment that accounted for roughly 16% of Thor Industries, Inc. (NYSE:THO)’s total sales in 2012. Similar to Winnebago Industries, Inc. (NYSE:WGO), Thor maintained a conservative balance sheet through the financial crisis, allowing it to acquire weaker competitors and gain market share.

In FY2013, Thor Industries, Inc. (NYSE:THO) has reported solid financial results, with increases in revenues and operating income of 27.3% and 31.0%, respectively, compared to the prior-year period. The company’s operating margin gained slightly, as it was able to offset rising commodity costs with operating efficiencies in its manufacturing network. Despite a weak operating margin in its bus segment, due to difficult funding challenges for its municipal customers, Thor Industries, Inc. (NYSE:THO) sees the segment as a growth market as people continue to gravitate toward public transit.