Winnebago Earnings: Dealers Have Not Quite Found Their Preferred Inventory Levels

Winnebago’s second-quarter fiscal 2024 adjusted diluted EPS of $0.93 beat the $0.85 LSEG consensus despite continued hesitation by its dealers to increase inventory. Management expects fiscal third-quarter results to be better than fiscal second quarter, mostly on towable segment growth, but it also stressed uncertainty on if the normal seasonal demand of robust spring and summer sales will happen this year. We have lowered our fiscal 2024 revenue projection for this reason, but we are increasing our fair value estimate to $86 from $81 on time value of money and from raising our midcycle operating margin by 50 basis points to 8.5%. The margin increase results from management announcing midcycle organic growth targets, including revenue of $4.5 billion to $5 billion and gross margin of 18%-18.5%. Timing is uncertain, but CEO Michael Happe said in roughly at least three years time it hopes to achieve these levels. Our midcycle fiscal 2028 gross margin is 14.5% to capture upside and downside profit levels over time, per our methodology, but we model 18% in fiscal 2027.