Fleetwood Insider Is Buying Despite RV Sales Worries
If you like to buy stocks when they’re down, RV builder Fleetwood Enterprises may be an intriguing idea right now.
The company’s president seems to think so: He recently bought 12,000 shares with his own cash. It was his first open-market purchase in about five years, he says.
Riverside-based Fleetwood is the nation’s leading maker of travel trailers and motor homes (also called recreational vehicles, or RVs) and a major player in the manufactured housing market.
Despite earning $1.23 a share in the fiscal year ended April 30--a 38% gain from the previous year--the company saw its stock slide from a winter peak of $26.875 a share to $18.25, a drop of 32%.
Some investors have bailed out of the shares on worries that people are reluctant to buy big-ticket items, such as motor homes, because of uncertainty over tax hikes in President Clinton’s economic plan. Fleetwood, which makes the Cadillac of motor homes, prices its average model at about $45,000.
In fact, motor homes still are moving out of showrooms at a decent pace, Fleetwood says. But, as cautious dealers let inventories shrink, the firm isn’t shipping as many as had been expected--for now. Competition from smaller challengers, such as Winnebago and Cruise America, also is a factor.
Meanwhile, Fleetwood’s manufactured housing business, which accounted for 40% of its $1.9 billion in sales last year, continues to boom. “Our backlog is up 30% over last year, and we don’t see any end in sight” said Paul Bingham, Fleetwood’s chief financial officer.
While some people still deride them as “mobile homes,” manufactured homes are in hot demand because they represent the only form of housing within reach for many Americans. Fleetwood’s average unit sells for $18,000.
Still, Fleetwood needs a pickup in RV orders if it is to meet Wall Street’s consensus earnings estimate of $1.53 a share this year. Bingham is cautious, saying the company is more comfortable with a lower estimate--he hints at between $1.30 and $1.40--”until we see strength in RVs again.”
He also noted that, although the company sells RVs nationwide, it is “heavily dependent” on California. So, any worsening of the state economy could hurt Fleetwood.
None of those concerns have gotten in Fleetwood President Glenn Kummer’s way, however. He bought 12,000 shares on May 28 for an average $16.82 each. “I had some cash, and I felt it was as good a place to put it as any place,” he said. Though Kummer had purchased the stock in the past with options, he had not made an open-market buy in five years or so, he says. The 12,000 shares constitute his entire holdings now.
At $18.25 a share, the stock trades for just 15 times last year’s earnings. The dividend yields 2.7%, and the company has no long-term debt.
Because of the aging population and rising numbers of retirees, the outlook for RV sales is compelling, analysts say. And manufactured housing is a growth industry: It may be the only kind many people will ever be able to afford.
Fleetwood: Time to Buy?
Shares of Fleetwood Enterprises, the Riverside-based maker of recreational vehicles and manufactured housing, have slumped this year on fears of a slowing economy. But some analysts say the stock is a long-term bargain at current levels, because demographics suggest strong demand for RVs in this decade.
Weekly closing prices, NYSE:
Source: Dow Jones News Retrieval
