- The shares trade at just 5.3 times forward earnings and pay an annual dividend yield of nearly 9%
- Investors should brace for a missed profit and be ready to buy stocks at attractive pullback levels
- Rising interest rates, recession risks and falling consumer spending are major headwinds
- Revenue growth fell from 25.4% in the prior-year period to just 5.2%
- Camping World reported its best-ever quarter by revenue and second-best quarter of earnings ending in June 2022
Camping products and recreational vehicle (RV) retailer Camping World (NYSE: CWH) has been a direct beneficiary of the pandemic as consumers discover or rediscover outdoor recreation. The lifting of COVID restrictions and the proliferation of vaccinations haven’t halted Camping World’s growth. Investors are wondering if a new normal is emerging for the industry. From a valuation perspective, the shares are trading very cheaply at just 5.3 times forward earnings with a whopping 8.75% annual dividend, assuming future estimates aren’t revised downwards. It’s actually trading at a cheaper valuation than RV maker Winnebago (NYSE: WGO) at a low 4.1 times forward earnings on a meager 1.9% annual dividend yield, or Thor Industries (NYSE: THO) at 9.2 times expected earnings and an annual dividend yield of 2.3% dividend yield.
preparing for a recession
The US Federal Reserve has hiked interest rates by 3% over the past six months to curb rampant inflation. Results have been slow to materialize, however, as September’s CPI came in at 8.2%, missing analyst estimates of 8.1% but still showing progress from June’s highs of 9.1%. The (-36%) drop in RV shipments for the industry in August could herald a drop in Camping World RV sales. Normalization and the potential for a slowdown in selling to be reported in the next earnings report should keep investors from rushing into the stock. The RV business has been in full swing since the pandemic lockdowns and appears to be very sticky as underlying consumer lifestyle changes continue to drive demand. However, rising interest rates and falling consumer spending have likely taken a toll on demand, and investors should brace themselves for potential deficits. Supply chain restrictions have been eased, as evidenced by vehicle inventories more than doubling from the same period last year.
Minimal and mobile lifestyle trend driver
The pandemic reinforced the trend towards minimalist and mobile living, as well as experiential travel and outdoor recreation. There are numerous new content providers on YouTube (NASDAQ: GOOGL) presenting the joys of van living and RV driving as a lifestyle adaptation that goes beyond vacationing but is also applicable as a mobile home and office. There’s a chance a recession could push more consumers toward minimalist and mobile living, especially as fuel costs continue to fall.
Will normalization come in the third quarter of 2022?
On August 2, 2022 Camping World reported its second quarter 2022 results for the fiscal year ended June 2022. The company reported earnings of $2.16 per share, beating analyst estimates of $1.79 per share by $0.37 per share. Revenue rose 5.2% year-on-year (YoY) to $2.17 billion, beating analyst estimates of $2.03 billion. Inventories of new and used vehicles rose to $1.7 billion from $782.5 billion a year ago, due to the easing of supply chain restrictions. The company continues to pay its quarterly dividend of $0.625 per share or annual dividend of $2.50 per share.
The prophet speaks
Prominent Camping World CEO Marcus Lemonis commented: “We are delighted with the sale of nearly 39,000 new and used RVs contributing to record second quarter sales. We believe our team has both the focus and experience to manage our business through changing market conditions, as evidenced by our solid financial results.”
Here’s what the charts say
Using the Rifle charts in the weekly and daily time frames offers a broader view of the landscape for CWH stock. The weekly Rifle chart formed a collapse as shares fell below $27.17 Fibonacci (fib) level to bottom near the Fib $23.03 level before embarking on a rally. The 5-period moving average (MA) weekly resistance is still falling to $25.96, followed by the rising 15-period MA at $27.68. 200-period weekly MA support is slowly rising to $25.23. The weekly 50-period MA resistance falls to $30.81. The weekly newspaper Market Structure Low (MSL) The buy trigger is still holding at $24.35. The weekly stochastic is breaking through the 40 bands and the weekly lower Bollinger Bands (BBs) are at $18.74. The daily Rifle chart is in an uptrend but is losing momentum as the daily 5-period MA support at $27.39 is tested, followed by a rising 15-period MA at $26.14. The daily stochastic broke through the 80 band. The daily 50-period MA at $28.83 almost overlaps the daily 200-period MA resistance at $28.99. Daily top BBs are at $30.27 and daily bottom BBs are at $22.14. Given the potential for a weak earnings report, it is best to await earnings reaction to a sell-off attractive pullback levels at $25.39, $23.98 Fib, $23.03 Fib, $20.83 Fib, $19.55 Fib and the $17.70 Fib level.
Hear this before you consider Camping World.
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