PreMarket Prep Stock Of The Day: Winnebago Industries

Investors can get as sophisticated as they want with their fundamental and technical analysis, but sometimes good old common sense can be the best investment tool. With that concept in mind, Winnebago Industries WGO is the PreMarket Prep Stock of the Day.

Gas Guzzlers: The first thing that comes to this author's mind when the word “Winnebago” is mentioned is the rising cost of gas that is needed to run and support the monstrous vehicles.

With the sharp rise in crude oil prices, it is not surprising to see the issue has been under selling pressure since last March that has rapidly accelerated over the last few months.

A major factor in that decline could very well be consumers reconsidering purchasing recreational vehicles.  

On The Road To Recovery: Whereas the S&P 500 index bottomed from its recent decline on Feb. 24, Winnebago did not find a tradeable bottom until March 8 at $56.58. That was just under its previous day's low of $56.71, making it a double bottom.

That marked the lowest level for the issue since December, when it bottomed at $53.09. The high for the rebound was made on Tuesday at $62.72 along with the highest close for the rebound at $62.38. That high coincided with two other daily highs from March 7 ($62.50) and March 9 ($62.43).

Winnebago Posts Q2 Beat But Misses On Gross Margins: Before the open Wednesday, the company reported quarterly earnings of $3.14 per share, which beat the analyst consensus estimate of $2.94 by 6.8%.

This is a 48.11% increase over earnings of $2.12 per share from the same period last year. The company reported quarterly sales of $1.17 billion, which beat the analyst consensus estimate of $1.1 billion by 5.91%. This is a 38.71% increase over sales of $839.89 million in the same period last year.

Posted gross margins fell short of analyst expectations, coming in at 18.6%, which was below the 18.9% estimate.

PreMarket Prep's Take On Winnebago: When the issue was being covered on the show Wednesday, it was trading at the $62 area, which was slightly in the red.

Co-host Dennis Dick commented on rising gas prices and stated: “It is going to be really rough for the company moving forward for that exact reason, and I am not a fan of it.”

The author of this article was surprised the issue was still near $62 and noted that would be an area of resistance if the issue went into rally mode. A few different potential support areas were mentioned if one was in the “buy the dip” mode.

WGO Price Action: Immediately after the issue was discussed, a big seller came in and annihilated the issue. In fact, it crashed, with an opening print of $57.37. Following a brief rally to $59, the issue resumed its move lower. As of 1:15 p.m. EDT, $55.17 stands as the low for the session and the stock is attempting to rebound.

The discussion on Winnebago from Wednesday’s show can be found here:

Photo courtesy of Winnebago.