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Why WGO Stock is Not a Buy Now Despite its Innovative 2025 Lineup
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Recreational vehicle (RV) maker Winnebago Industries (WGO - Free Report) recently unveiled its 2025 lineup at the Hershey RV Show. Nearly 150 new models from its premium brands — Winnebago, Grand Design, and Newmar — were showcased. Among the standout models are the Winnebago Revel Sport, designed for off-road adventures and the View/Navion, with advanced technology and flexible interiors. The company’s new intelligent platform, Winnebago Connect, provides enhanced RV management.
Grand Design debuted its Lineage Series M, entering the Class C motorhome market alongside updates to the Transcend and Reflection lines. Newmar presented the Northern Star, a more affordable luxury diesel option, and introduced the 2025 Onyx Package, adding sleek black accents to select Class A models.
The new lineup emphasizes innovation, quality and outdoor connectivity, catering to a range of lifestyles and budgets. Despite the buzz around its 2025 lineup, WGO shares have been under pressure, reflecting broader challenges in the RV industry.
While the offerings underscore Winnebago’s adaptability and forward-thinking approach, the company is battling various challenges that make it difficult to recommend WGO stock as a buy right now.
WGO Stock Under Fire
While RVs emerged as a rare travel winner in 2020 and 2021, the craze for the same has long been over. A rising interest rate environment and economic uncertainty have played spoilsports. The RV space relies heavily on consumers' affordability. Along with higher interest rates and inflationary pressures, consumer appetites for large purchases have dwindled considerably. Customers haven’t been keen on taking a high-interest rate debt to finance their RV purchases.
Consequently, the demand for Winnebago’s products has significantly declined post-pandemic, translating into a sharp drop in revenue and earnings, making the stock underperform. Year to date, WGO stock price has declined more than 22%, underperforming the industry and its peers like Thor Industries (THO - Free Report) and Patrick Industries (PATK - Free Report) .
YTD Price Performance Comparison
Image Source: Zacks Investment Research
Winnebago’s financial performance in recent quarters has been disappointing. In the last reported quarter, the company saw a 47% year-over-year decline in earnings and a 13% fall in revenues. The weakness in the RV maker’s motorhome and marine segments, which saw significant declines in unit volumes and revenues, is expected to persist through the remainder of the year.
The excess inventory in both the motorhome RV and marine categories presents an additional challenge, leading to potential pricing pressures. To clear this backlog, Winnebago may be forced to offer steep discounts, further eroding its profit margins. In fact, gross margins have already been declining due to these pressures, and the company has indicated that profitability is likely to remain under strain in the near term. While sales grew for the Towable RV business, margins took a hit amid low selling prices. Adjusted EBITDA margin of the unit contracted 310 basis points to 10.9%.
For fourth quarter of fiscal 2024, Winnebago has forecasted flat to slightly down total revenues on a sequential basis, signaling that the company’s struggles are far from over. Another red flag for investors is Winnebago’s diminishing order backlog, which suggests weakening future demand. At the end of the most recent quarter, the backlog in the company’s motorized RV segment was down 55.7% from the prior year, while the backlog in its towable RV segment declined 35.1%. The marine segment's backlog fell 57.6%.
The Zacks Consensus Estimate for WGO’s fiscal 2024 sales and earnings implies a decline of 14% and 45%, respectively. Over the past 90 days, the consensus estimate for WGO’s earnings per share (EPS) for the upcoming quarters and the current and next fiscal years has been lowered.
Image Source: Zacks Investment Research
The company is currently trading below both its 50- and 200-day moving averages. It has a lot of work to do before the stock chart starts to look attractive again.
WGO Share Price Below 50 & 200-Day SMA
Image Source: Zacks Investment Research
Catalysts for WGO: Dividend and Potential Rate Cuts
While the overall outlook for Winnebago is not encouraging, there are some positives. The company’s dividend remains a major draw for income-focused investors. Winnebago has paid a quarterly dividend for 40 consecutive quarters and has been consistently raising it in recent years. In the first quarter of fiscal 2024, the company hiked its dividend by 15%, following substantial year-over-year increases in the previous two years. The five-year annualized dividend growth rate stands at an impressive 31.3%.
Additionally, the Federal Reserve is likely to cut interest rates this month. That could provide a boost to Winnebago and the broader RV industry, as lower interest rates would make financing RV purchases more affordable.
Is WGO Stock Valuation Appealing?
At first glance, Winnebago may appear attractive based on its valuation. The stock trades at a forward price-to-earnings (P/E) ratio of just 9.91, which is relatively cheap compared to industry’s 17.42 but slightly higher than its own 5-year average of 9.25.
Image Source: Zacks Investment Research
Having said that, the risks still outweigh the rewards at this point. With earnings continuing to slide, inventory levels high, and demand weak, it’s difficult to make a bullish case for WGO stock until both its financial and operational metrics begin to stabilize.
Avoid Investing in WGO Stock for Now
Winnebago’s innovative 2025 lineup highlights the company’s ability to stay ahead of consumer trends in the RV market, but broader economic factors and weak financial performance weigh heavily on its stock. While its dividend and potential interest rate cuts could act as positive catalysts, its hard to ignore the near-term challenges that the company faces. It is unlikely that demand will rebound significantly in the near term. For now, investors are better off waiting on the sidelines until Winnebago’s fundamental and technical picture improves.
WGO stock currently carries a Zacks Rank #4 (Sell).
Image: Shutterstock
Why WGO Stock is Not a Buy Now Despite its Innovative 2025 Lineup
Recreational vehicle (RV) maker Winnebago Industries (WGO - Free Report) recently unveiled its 2025 lineup at the Hershey RV Show. Nearly 150 new models from its premium brands — Winnebago, Grand Design, and Newmar — were showcased. Among the standout models are the Winnebago Revel Sport, designed for off-road adventures and the View/Navion, with advanced technology and flexible interiors. The company’s new intelligent platform, Winnebago Connect, provides enhanced RV management.
Grand Design debuted its Lineage Series M, entering the Class C motorhome market alongside updates to the Transcend and Reflection lines. Newmar presented the Northern Star, a more affordable luxury diesel option, and introduced the 2025 Onyx Package, adding sleek black accents to select Class A models.
The new lineup emphasizes innovation, quality and outdoor connectivity, catering to a range of lifestyles and budgets. Despite the buzz around its 2025 lineup, WGO shares have been under pressure, reflecting broader challenges in the RV industry.
While the offerings underscore Winnebago’s adaptability and forward-thinking approach, the company is battling various challenges that make it difficult to recommend WGO stock as a buy right now.
WGO Stock Under Fire
While RVs emerged as a rare travel winner in 2020 and 2021, the craze for the same has long been over. A rising interest rate environment and economic uncertainty have played spoilsports. The RV space relies heavily on consumers' affordability. Along with higher interest rates and inflationary pressures, consumer appetites for large purchases have dwindled considerably. Customers haven’t been keen on taking a high-interest rate debt to finance their RV purchases.
Consequently, the demand for Winnebago’s products has significantly declined post-pandemic, translating into a sharp drop in revenue and earnings, making the stock underperform. Year to date, WGO stock price has declined more than 22%, underperforming the industry and its peers like Thor Industries (THO - Free Report) and Patrick Industries (PATK - Free Report) .
YTD Price Performance Comparison
Image Source: Zacks Investment Research
Winnebago’s financial performance in recent quarters has been disappointing. In the last reported quarter, the company saw a 47% year-over-year decline in earnings and a 13% fall in revenues. The weakness in the RV maker’s motorhome and marine segments, which saw significant declines in unit volumes and revenues, is expected to persist through the remainder of the year.
The excess inventory in both the motorhome RV and marine categories presents an additional challenge, leading to potential pricing pressures. To clear this backlog, Winnebago may be forced to offer steep discounts, further eroding its profit margins. In fact, gross margins have already been declining due to these pressures, and the company has indicated that profitability is likely to remain under strain in the near term. While sales grew for the Towable RV business, margins took a hit amid low selling prices. Adjusted EBITDA margin of the unit contracted 310 basis points to 10.9%.
For fourth quarter of fiscal 2024, Winnebago has forecasted flat to slightly down total revenues on a sequential basis, signaling that the company’s struggles are far from over. Another red flag for investors is Winnebago’s diminishing order backlog, which suggests weakening future demand. At the end of the most recent quarter, the backlog in the company’s motorized RV segment was down 55.7% from the prior year, while the backlog in its towable RV segment declined 35.1%. The marine segment's backlog fell 57.6%.
The Zacks Consensus Estimate for WGO’s fiscal 2024 sales and earnings implies a decline of 14% and 45%, respectively. Over the past 90 days, the consensus estimate for WGO’s earnings per share (EPS) for the upcoming quarters and the current and next fiscal years has been lowered.
Image Source: Zacks Investment Research
The company is currently trading below both its 50- and 200-day moving averages. It has a lot of work to do before the stock chart starts to look attractive again.
WGO Share Price Below 50 & 200-Day SMA
Image Source: Zacks Investment Research
Catalysts for WGO: Dividend and Potential Rate Cuts
While the overall outlook for Winnebago is not encouraging, there are some positives. The company’s dividend remains a major draw for income-focused investors. Winnebago has paid a quarterly dividend for 40 consecutive quarters and has been consistently raising it in recent years. In the first quarter of fiscal 2024, the company hiked its dividend by 15%, following substantial year-over-year increases in the previous two years. The five-year annualized dividend growth rate stands at an impressive 31.3%.
Additionally, the Federal Reserve is likely to cut interest rates this month. That could provide a boost to Winnebago and the broader RV industry, as lower interest rates would make financing RV purchases more affordable.
Is WGO Stock Valuation Appealing?
At first glance, Winnebago may appear attractive based on its valuation. The stock trades at a forward price-to-earnings (P/E) ratio of just 9.91, which is relatively cheap compared to industry’s 17.42 but slightly higher than its own 5-year average of 9.25.
Image Source: Zacks Investment Research
Having said that, the risks still outweigh the rewards at this point. With earnings continuing to slide, inventory levels high, and demand weak, it’s difficult to make a bullish case for WGO stock until both its financial and operational metrics begin to stabilize.
Avoid Investing in WGO Stock for Now
Winnebago’s innovative 2025 lineup highlights the company’s ability to stay ahead of consumer trends in the RV market, but broader economic factors and weak financial performance weigh heavily on its stock. While its dividend and potential interest rate cuts could act as positive catalysts, its hard to ignore the near-term challenges that the company faces. It is unlikely that demand will rebound significantly in the near term. For now, investors are better off waiting on the sidelines until Winnebago’s fundamental and technical picture improves.
WGO stock currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here