The firm said it lowered its rating on the company, which manufactures and sells a variety of recreation vehicles and small to mid-size buses in North America, as it believes Thor will continue to see margin pressure.
"While demand trends still appear quite strong, we are downgrading the shares because we are concerned that the company will continue to see gross margin pressure for the foreseeable future, mainly from rising labor costs," BMO said.
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"Unlike potential pressure from changes in materials costs, currencies, or discounting, which may come and go, we think the labor issue is more a structural one that does not look like it will alleviate anytime soon," BMO added.
The firm cut its price target on Thor Industries to $54 from $62.
Separately, TheStreet Ratings team rates THOR INDUSTRIES INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
"We rate THOR INDUSTRIES INC (THO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, growth in earnings per share, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 17.7%. Since the same quarter one year prior, revenues rose by 15.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- THO has no debt to speak of therefore resulting in a debt-to-equity ratio of zero, which we consider to be a relatively favorable sign. To add to this, THO has a quick ratio of 1.63, which demonstrates the ability of the company to cover short-term liquidity needs.
- THOR INDUSTRIES INC has improved earnings per share by 7.3% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, THOR INDUSTRIES INC increased its bottom line by earning $3.28 versus $2.86 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.28).
- Net operating cash flow has significantly increased by 754.68% to $50.03 million when compared to the same quarter last year. In addition, THOR INDUSTRIES INC has also vastly surpassed the industry average cash flow growth rate of -37.34%.
- The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
- You can view the full analysis from the report here: THO Ratings Report