VSkeep living your financial life on the fast lane, Camping World Holdings (NYSE: CWH) released consensus second quarter 2021 results on August 2. This is the fourth consecutive quarter for the company topping Wall Street’s earnings per share forecast. Unlike in previous quarters, where investors remained cautious due to the notorious volatility of the leisure vehicle sector, the market this time reacted positively to the success of Camping World, its stock closing at the end of the day up 7. 16%.
With the new information available, there are at least three important points to remember when supporting a bull business for Camping World.
1. Record results continue
Camping World’s second quarter set a slew of new records, with revenue rising 28.3% year-over-year to an all-time high of $ 2.06 billion. In this context, it should be remembered that the surge in RV sales triggered by the COVID-19 lockdowns was already in full swing in the second quarter of 2020, which means that the improvement in results compares favorably with an already positive situation for the company last year. In the end, adjusted earnings per share (EPS) climbed 54.9% year-over-year, from $ 1.62 to $ 2.51 EPS. Adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, set a third record, jumping 51% to $ 333.3 million.
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The company has also expanded its SuperCenter dealer network to nine locations. As a result, it now has a current or future presence in 46 of the 48 contiguous U.S. states, bringing it closer to its strategic goal of establishing a physical presence in each state.
Significantly, Camping World’s gross and net margins both improved. Gross margin increased 644 basis points to 36.9%, while net margin increased from 10.2% to 11.9% year-on-year. From this, it is possible to deduce that the growth in the profitability of the company is not just due to increased sales, but also to increased efficiency and better margins on individual sales.
Seeking better margins is a strategic objective for Camping World, which the motorhome seller appears to be achieving with considerable success. On the second quarter earnings conference call, CEO Marcus Lemonis underscored this growth factor when he said that “margin maximization” is “a golden ticket given to us, and c ‘is our obligation to grasp that. “
2. It improves the quality of its actions and its balance sheet
Not content with the increase in sales, Camping World appears to be reinvesting at least a portion of its record earnings in internal improvements and investments. It continued its share buyback program, reducing dilution and increasing the future EPS of the outstanding shares still in the hands of investors. During the second quarter, it repurchased $ 45.5 million of common stock, or approximately 1.15 million shares.
More recently, in the early days of August, the company allocated more funds to share buybacks, adding $ 125 million to the buyback program. This is in addition to the remaining $ 33 million from a previous authorization. Lemonis noted that “the increase in the share buyback program reflects the confidence that our management team” has “in the future performance of the company and its ability to generate strong cash flow”. Actual buybacks will be done on an opportunistic basis rather than according to a set schedule.
In terms of debt, Camping World has also improved the health of its balance sheet. Her current leverage is around 1.14 times adjusted EBITDA, according to Lemonis, and she continues to repay her long-term debt. It also refinanced its credit facilities, reducing the margin rate by 25 basis points and gaining more time to repay with a renegotiated 2028 maturity. It ended the quarter with around 15% more cash than at the end of Q2 2020. Overall, the company appears to have a meager balance sheet with good cash flow and reserves to complete its buyout program. shares in order to give more value to its investors.
3. Upward trends in RVs continue, tips are improving
The market remains very favorable for Camping World and the motorhome sector in general. Outdoor stocks are booming as people seek out the great outdoors on the North American continent. While many countries maintain restrictions on air travel, and previously popular cruise ship vacations are still largely banned, vacations seem to be almost reverting to pre-airliner models, with people mainly resting in regional camping areas or national parks.
Even beyond the pandemic, however, the recreational vehicle trend may have gathered momentum as more people, and many younger generations, get involved in the lifestyle. RV Industry Association data shows all-time highs for June RV shipments (the latest month for which data is available). Shipments surpassed the previous June 2017 record of 7% and 23.5% last June, with 50,706 units shipped. The second quarter as a whole has the most shipments for any quarter since records began decades ago.
Camping World has raised its guidance in this context of record sales. It now forecasts adjusted EBITDA of $ 810 million for the full year 2021, up 5.2% from its May forecast. Lemonis declined to guide the 2022 results on the results conference call, but said Camping World executives were “excited” about the future.
He also teased that, when it comes to EVs, “on the morning of September 15, we will unveil a product offering that the outdoor and recreational space has never seen before, all in one place.” With an attractive new potential offering for the upcoming electrification craze, strong momentum, a favorable market, and improvements in the balance sheet, it looks like Camping World is likely to be a good investment among consumer discretionary stocks this year and likely. longer term.
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Rhian Hunt has no position in the stocks mentioned. The Motley Fool recommends Camping World Holdings. The Motley Fool has a disclosure policy.
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