If American’s liked outdoor activities before, they love them even more now. The COVID-19 pandemic has done many things, and one of them is reinvigorating American’s love of the outdoors. Data from across the industry shows a sustained uptick in revenue that has the entire complex moving higher.
The RV Industry Association, for example, reports shipments of RVs are up greater than 30% in 2020 and are expected to grow another 20% or more in 2021. If data from the two of the industry’s largest manufacturers are any indication, that forecast is very conservative.
And the gains aren’t limited to RVs. Everything that has anything to do with outdoor recreation is booming. Sales at Dicks Sporting Goods, an iconic brand for retail and the outdoors, has seen a sustained 20% increase in revenue since the 2nd quarter shutdowns. If anything, revenue in this sector is being held back by rapidly declining inventory and tight shipping conditions.
The stocks we are about to show all have something in common; the outdoors. Within the group, you will find everything from RVs to Radios and everything in between an outdoor enthusiast could need or want. Some pay dividends and some don’t, but all will deliver solid returns to investors in 2021.
Quick Links
- Winnebago
- Thor Industries
- Camping World
- American Outdoor
- Garmin
- Johnson Outdoors
- Acushnet Holdings
#1 - Winnebago (NYSE:WGO)
Citigroup analysts summed it up nicely when they upgraded Winnebago (NYSE:WGO) from Neutral to Buy. According to them, it will be years before there is any “normalcy” in global travel while the appeal of RV lifestyles is here to stay. That sentiment is backed up by comments from Wedbush to the effect Winnebago is benefiting from a number of trends. In their view, the COVID-19 pandemic is only the tip of the iceberg. Consumer habits have changed and driving this company to profits.
The Q3 2020 results are phenomenal. The company not only reported a strong 35% increase in YOY revenue but sales accelerated from the 2nd quarter and the outlook for 2021 is robust. Winnebago’s backlog grew 313% from the year-ago period on strong consumer demand. The strength in sales is providing cost leverage that expanded margins by 390 basis points. That’s big news for a dividend-growth stock like Winnebago.
Winnebago’s 0.90% yield isn’t much to brag about but the 10% payout ratio and 37% CAGR are. With earnings growing like they are we can expect the dividend to continue growing as well.
About Winnebago Industries
Winnebago Industries, Inc manufactures and sells recreation vehicles and marine products primarily for use in leisure travel and outdoor recreation activities. The company operates through three segments: Towable RV, Motorhome RV, and Marine. It provides towable products that are non-motorized vehicles to be towed by automobiles, pickup trucks, SUVs, or vans for use as temporary living quarters for recreational travel, such as conventional travel trailers, fifth wheels, folding camper trailers, and truck campers under the Winnebago and Grand Design brand names.
Read More - Current Price
- $49.98
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $68.13 (36.3% Upside)
#2 - Thor Industries (NYSE:THO)
Thor Industries (NYSE:THO )is the 2nd of the big two RV manufacturers on our list. This company operates in three segments that are all seeing robust demand increases that show no sign of slowing down. The Q3 report shows that revenue is not only growing on a YOY basis but that growth is accelerating. The best news is that company backlogs are up 195% over the previous year ensuring many quarters of operational strength if not growth.
Something investors should take note of is the margins. Increased demand at Thor Industries is creating cost-leverage and amping the earnings. This is important because Thor Industries, like many of its outdoor recreation peers, trades at a deep discount relative to the broad market and pays a safely growing dividend. The company has been increasing for 9 years with every indication the 10th increase will come next year. And the yield is about double the payment from Winnebago.
About THOR Industries
THOR Industries, Inc designs, manufactures, and sells recreational vehicles (RVs), and related parts and accessories in the United States, Canada, and Europe. The company offers travel trailers; gasoline and diesel Class A, Class B, and Class C motorhomes; conventional travel trailers and fifth wheels; luxury fifth wheels; and motorcaravans, caravans, campervans, and urban vehicles.
Read More - Current Price
- $97.26
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $112.33 (15.5% Upside)
#3 - Camping World (NYSE:CWH)
Camping World (NYSE:CWH) is to camping what Walmart is to everyday life. If Camping World doesn’t have it there is a good chance that you don’t need it. The company not only serves as an RV dealership it also rents RVs, sells all manner of RV supply and equipment, as well as tents, sleeping bags, gear, and electronics for more-traditional methods of camping.
Not only is Camping World growing at a double-digit pace but it is making inroads to disrupt the entire RV market. The company announced a collaboration with Lordstown Motors to electrify the RV world. To begin with, Camping World’s 170 camping centers are going to be retrofit to handle Lordstown Motors vehicles beginning with the Endurance pickup truck. Later, the two will work towards building EV-RVs built on the Endurance platform. If you are curious, the entire EV market is worth about 2.5% of global vehicle sales and expected to grow at a 30-40% CAGR for the next three to four decades.
About Camping World
Camping World Holdings, Inc, together its subsidiaries, retails recreational vehicles (RVs), and related products and services in the United States. It operates in two segments, Good Sam Services and Plans; and RV and Outdoor Retail. The company provides a portfolio of services, protection plans, products, and resources in the RV industry.
Read More - Current Price
- $21.31
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 8 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $28.00 (31.4% Upside)
#4 - American Outdoor (NASDAQ:AOUT)
American Outdoor (NASDAQ:AOUT) was recently spun off from Smith & Wesson with little fanfare. The company manufactures all manner of gear for gun owners, hunters, and outdoor enthusiasts that aren’t actual firearms and seeing a robust uptick in demand across all segments.
Notably, the 65.7% increase in YOY revenue reported for the fiscal 2nd quarter of 2020 (calendar 3rd) was driven by a strong uptick in digital sales. Sales through eCommerce channels surged 213.4% and are expected to remain strong well into 2021.
American Outdoor Brands also offers great value. The stock has been trading near 10X its F2021 earnings providing a deep discount from the broad market. This company doesn’t pay a dividend but it is looking to grow. As of the end of the F2nd quarter the company had a little more than $100 million in cash and working capital earmarked for growth efforts and acquisitions.
About American Outdoor Brands
American Outdoor Brands, Inc provides outdoor products and accessories for rugged outdoor enthusiasts in the United States and internationally. It offers hunting, fishing, camping, shooting, and personal security and defense products. The company also provides shooting sports accessories products include rests, vaults, and other related accessories; outdoor lifestyle products, such as premium sportsmen knives and tools for fishing and hunting; land management tools for hunting preparedness; harvesting products for post-hunt or post-fishing activities; outdoor cooking products; and camping, survival, and emergency preparedness products.
Read More - Current Price
- $14.98
- Consensus Rating
- Buy
- Ratings Breakdown
- 2 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $12.50 (16.6% Downside)
#5 - Garmin (NYSE:GRMN)
Garmin (NASDAQ:GRMN) may be most famous for its GPS devices but it is so much more than that. This company makes electronic devices both connected and not for all walks of life. Not only are there a wide array of GPS devices to choose from (car, boat, hiker, etc) but there are also products for fishermen, bicyclists, hunters, fitness, aviation, and on and on. While there is some weakness on a segment basis, most segments are reporting high-single to low double-digit sales increases versus the same period in 2019.
This company doesn’t offer the same kind of value as some others on our list but that’s because it has been growing at a steady high single-digit to low double-digit rate for several years. Even so, trading about 24X 2020 earnings the stock is a value relative to other dividend-paying stocks in the tech sector. The stock yields about 2.0% with shares near $118 and there is some expectation for dividend growth.
About Garmin
Garmin Ltd. designs, develops, manufactures, markets, and distributes a range of wireless devices worldwide. Its Fitness segment offers running and multi-sport watches; cycling products; smartwatch devices; scales and monitors; and fitness accessories. This segment also provides Garmin Connect and Garmin Connect Mobile, which are web and mobile platforms where users can track and analyze their fitness, activities and workouts, and wellness data; and Connect IQ, an application development platform.
Read More - Current Price
- $208.99
- Consensus Rating
- Reduce
- Ratings Breakdown
- 1 Buy Ratings, 2 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $171.00 (18.2% Downside)
#6 - Johnson Outdoors (NASDAQ:JOUT)
Johnson Outdoors (NASDAQ:JOUT) made its name with trolling motors and other electronics for fishing and boating. It has since branched out into a wider array of electronic devices, equipment, and gear for outdoor enthusiasts. These include but are not limited to tents, camp stoves, kayaks, canoes, and diving/snorkeling equipment.
While sales took a hit in the calendar 2nd quarter of the year they have rebounded strongly putting the company on track for YOY growth in 2020. In fact, company CEO Helen Johnson-Liepold says the biggest challenge has been keeping up with demand. We think it is a challenge the company can overcome and leverage to profits.
Johnson Outdoors also has value and a dividend to offer investors. The stock is trading about 17X this year’s earnings and 15X next year’s earnings which suggests upward bias in share prices. The dividend isn’t much in terms of yield but safe in every other way. The company is paying out less than 15% of earnings, has a fortress balance sheet, plenty of free cash flow, and a 15% dividend CAGR.
About Johnson Outdoors
Johnson Outdoors Inc designs, manufactures, and markets seasonal and outdoor recreational products for fishing worldwide. It operates through four segments: Fishing, Camping, Watercraft Recreation, and Diving. The Fishing segment offers electric motors for trolling, marine battery chargers, and shallow water anchors; sonar and GPS equipment for fish finding, navigation, and marine cartography; and downriggers for controlled-depth fishing.
Read More - Current Price
- $37.37
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
#7 - Acushnet Holdings (NYSE:GOLF)
Acushnet Holdings (NYSE:GOLF) is the parent company of Titleist and other major golf brands. The company is not only a powerhouse of the industry but it is also a company with a fortress balance sheet. While revenue took a hit in the early portion of the year, the rebound is strong and one that has legs. The company’s 3rd quarter sales were driven by an increase in the sales of balls and shoes which they directly relate to a “significant increase in rounds of play”.
According to data from Golf Datatech, there was a substantial decline in rounds played during March and April but rebound strongly in June and July. The uptick in June and July is enough to show YOY growth for the year-to-date period. The number of rounds played has only been positive on a YOY basis since. There were 440 million rounds played in 2019, the total number in 2020 could be well over 460 million.
About Acushnet
Acushnet Holdings Corp. designs, develops, manufactures, and distributes golf products in the United States, Europe, the Middle East, Africa, Japan, Korea, and internationally. The company operates through four segments: Titleist Golf Balls, Titleist Golf Clubs, Titleist Golf Gear, and FootJoy Golf Wear.
Read More - Current Price
- $69.92
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $71.40 (2.1% Upside)
If there is one thing clear, it is that earnings within the outdoor recreational stocks are booming. Not only is demand high, but it is also sustainable because, let’s face it, gyms and theme parks aren’t quite as attractive as they used to be. And outdoor recreation provides such a value. The longer it takes for things to get “back to normal,” the less like normal things are going to be.
The takeaway for investors is this. Within the sector, there are blue chips, tech stocks, growth stocks, dividend stocks, and more. There’s are compelling reasons to own outdoor recreation stocks. Now it’s time to find the right one for your portfolio.
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