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Thor shares decline despite upbeat earnings

 

Thursday, December 08, 2022

The news shaping the markets today

Russia’s military forces fired over 1,000 missiles and rockets at Ukraine’s power grid. The news sent the safe-haven US dollar index higher this morning.


Australia’s trade surplus narrowed to A$12.22 billion in October, from a three-month high of A$12.44 billion in September, exerting pressure on the AUD/USD forex pair.


Japan’s economy shrank 0.8% on an annualised basis in the third quarter, compared to 4.6% growth in the prior period. This being the first contraction in a year sent the JPY/USD pair lower in forex trading this morning.


Brazil’s central bank maintained its key Selic rate at 13.75% for the third meeting in a row, in-line with market estimates. The BRL/USD forex pair traded higher following the bank’s move.


US total consumer credit increased $27.1 billion in October, versus $25.8 billion growth in the earlier month. Despite this, the Dow Jones index closed almost flat on Wednesday.

 

What’s happening: Shares of Thor Industries fell on Wednesday after the company released results for its fiscal first quarter.

What happened: Thor Industries reported quarterly earnings that exceeded market views on Wednesday.

Although the company announced a decline in overall sales, one of its recreational vehicle (RV) segments reported a surge during the quarter.

How were the results: The Elkhart, Indiana-based company reported a double-digit decline in sales for its fiscal first quarter, but the figure still topped market views.

  • Net sales contracted by 21.5% year-over-year to $3.11 billion but exceeded the consensus estimates of $2.86 billion.
  • Earnings came in at $2.53 per share, surpassing Street expectations of $1.70 per share.

Why it matters: RV sales had risen sharply during the covid-19 pandemic, as people remained cautious of air travel. However, the demand for RVs has been on a decline with the waning of the pandemic-related concerns.

“Following a record fiscal 2022, the RV market has been negatively affected by macroeconomic headwinds impacting our consumers and independent dealers,” Bob Martin, the CEO of Thor Industries, said during the earnings call.

RV shipments fell 43.7% year-over-year to 32,652 in October, according to the RV Industry Association. The association also reported a 12% year-over-year decline in RV shipments between January and October.

The company’s net sales from North American Towable RVs fell 41.2% year-over-year in the fiscal first quarter, while European RVs contracted by 20.3%. However, sales of North American motorised RVs jumped 21.5%.

The company’s gross profit margins shrank 90 basis points from a year ago to 15.7%, while selling, general, and administrative expenses declined by 18.3% year-over-year to $241.6 million.

As of October 31, 2022, Thor Industries held inventories worth $1.85 billion and cash and equivalents of $291.7 million.

Management guided to net sales of $11.5-$12.5 billion for fiscal 2023, versus market estimates of $11.7 billion. They also projected earnings of $7.40-$8.70 per share, compared to Street views of $8.15 per share.

How shares responded: Thor’s shares fell 4.8% to close at $79.95 on Wednesday, following the release of quarterly results. The stock has lost around 24% year to date.

What to watch: Investors will keep an eye on the macroeconomic conditions as well as data on consumer confidence, which have an impact on the company’s performance.

The markets today

The Canadian dollar will be in focus today following Bank of Canada’s recent policy move

Context: The CAD/USD forex pair remained broadly flat on Wednesday after the Bank of Canada raised interest rates.

Details: Canada’s central bank increased its benchmark overnight interest rate by 50 basis points to 4.25%, the highest level since 2008.

The decline in the US dollar also supported the CAD/USD forex pair on Wednesday. The US dollar index, which measures the greenback’s performance versus a basket of major currencies, fell around 0.5% to 105.10.

However, the price of crude oil, one of Canada’s major exports, traded lower, exerting pressure on the loonie. WTI crude for January delivery declined $2.24 to $72.01 per barrel on Wednesday amid concerns over a global economic slowdown.

The CAD/USD forex pair traded almost flat at 1.3650 on Wednesday, after falling to its lowest level since November 4 at 1.3699. The S&P/TSX Composite index settled lower by 0.09% at 19,973.22, recording losses for the third straight session.

The overall sentiment for the Canadian dollar remains positive on expectations of easing covid-19 restrictions in China, which is major consumer of oil. Sentiment for the loonie is also supported by expectations of the US Federal Reserve ending its aggressive rate hikes.

What are expectations: With no major economic reports due from Canada today, traders will focus on data from the US. Markets will also monitor crude oil prices.

Other Markets: US indices closed mostly lower on Wednesday, with the S&P 500 and Nasdaq 100 down by 0.19% and 0.45%, respectively, and the Dow Jones index up by 0.01%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD  – 1.0496 and 1.0505 Positive
EUR/GBP – 0.8610 and 0.8619 Positive
Copper – 3.8324 and 3.8479 Positive
FTSE 100  – 7492.14 and 7523.64 Positive
Dow Jones index – 33555.86 and 33622.54 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0506, -0.01%) Dow ($33,560, -0.19%) Brent ($77.71, 0.7%)
GBP/USD (1.2190, -0.14%) S&P500 ($3,924, -0.31%) WTI ($72.63, 0.9%)
USD/JPY (136.80, 0.13%) Nasdaq ($11,462, -0.41%) Gold ($1,795, -0.2%)

What else to watch today

Saudi Arabia’s GDP growth rate, France’s payroll employment in private sector, South Africa’s current account and manufacturing production, France’s new car registrations, Turkey’s gross foreign exchange reserves, Brazil’s retail sales, Mexico’s inflation rate, US initial jobless claims, continuing claims and natural gas stocks change, as well as Spain’s consumer confidence indicator.


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