Why Winnebago Stock Popped 14%

What happened

Shares of Winnebago Industries (NYSE: WGO) are up 14% as of 10:50 a.m. EST after the RV maker reported expectation-thumping results this morning.

Continue Reading Below

Earnings for Winnebago's first fiscal quarter of 2019 came in at $0.70 per share. (Analysts were expecting $0.64). Sales for the quarter were $493.6 million, ahead of the $486.4 million consensus estimate.

So what

Winnebago grew its sales only about 9.7% year over year in Q1, but its profits surged 22.8%, which might lead one to believe Winnebago enjoyed implied good growth in profit margins. In fact, gross margin grew 40 basis points to 14.4%, but operating profit margin actually declined 30 basis points, to 6.6%. What really helped Winnebago to outperform in Q1, it turns out, was a decline in interest expense (to 0.9% of revenue) and a smaller tax bite (just 1.4% of revenue).

After factoring in those effects, Winnebago ended up with a net profit margin of 4.5%, up from 4% a year ago.

Now what

CEO Michael Happe nonetheless emphasized Winnebago's "upward momentum within the North American RV business and the positive integration of our new marine division," giving rise to "robust" sales growth and greater "retail market share on the RV side."

Winnebago didn't provide earnings guidance for the rest of this year as part of its earnings report on Q1, saying only that the company aims to build a "larger, more diversified, and more profitable organization; one with a productive, healthy balance sheet" in 2019, and to expand market share as the year progresses. For what it's worth, analysts who follow the company predict earnings per share of $3.74 this year, on sales of about $2.18 billion.

10 stocks we like better than Winnebago IndustriesWhen investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has quadrupled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Winnebago Industries wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 14, 2018

Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.