休闲车即将获得美联储补贴

As the U.S. enters a new cycle that could usher in accommodative monetary policy, there are industries that will prosper in this new environment of easier money and present a buying opportunity for investors. A study by Citigroup suggests that affordability for boats and RVs will not only improve on 2024 levels but bring about buying opportunities for the beaten down stocks in the sector.  

 “While affordability is by no means the only factor affecting demand, we believe investors are underestimating these tailwinds in much the same way we underestimate mounting tailwinds of the past two years,” Citigroup analyst James Hardiman says.

During the pandemic, lockdowns, social distancing, and the lack of travel options lured consumers flush with stimulus cash to recreational vehicles and boats. The cheap financing made both more affordable and a safer travel option. Shipments reached a peak in 2021, reaching 600K, an increase of 40% from the early years of the decade, according to industry data. And unlike vehicle sales which are more determined by the price of the vehicle, demand for RVs and boats hinges more on the monthly payment amount.

Unfortunately, the good times were not meant to last and when the Federal Reserve slammed on the brakes with a succession of rate hikes, RVs and boats became prohibitively expensive and relegated to the trash heap of post-pandemic diversions (see Peloton). With 80% of all RVs and half of all boats financed (the number gets higher with new boats), soaring interest rates left consumers with little taste for a home on wheels, driving deliveries down by more than half within two years.

Manufacturers lowered prices to maintain some level of affordability to compensate for higher financing rates, but the move eviscerated profits with Winnebago (NYSE:WGO) seeing profits crushed by 49% in Q1 2023, while LazyDays (GORV), the largest RV dealership in the U.S., experienced a 98.7% erosion in profits. Despite the enticements, retail sales fell to their lowest levels since 2015.

Now that looks about to change with Citigroup predicting the first two rate cuts will be in September and November at 50 basis points each with subsequent 25 basis point cuts until the Fed funds target rate reaches 3% to 3.25% in June 2025, a total of 225 basis points of rate cuts in the next 10 months.

Coupled with more moderate price increases, or even decreases beginning late this year and into next, the total cost of purchasing a leisure vehicle is expected to amount to a lower percentage of discretionary income than it did at the end of 2023. In addition, RVs and boats can expect to see the most benefit from lower interest rates and inflation in 2025 which will drive RV and boat affordability to levels comparable to 2022.

Within Citigroup’s coverage, leisure vehicles are “far and away the biggest rate cut beneficiaries” with RVs and boats the best way to play the rate cut, or soft-landing, trade. Hardiman calculates that the affordability of an average RV will increase in 2025 with a monthly payment representing 12.6% of monthly discretionary income versus 16% of discretionary income in 2023.

For investors, Citigroup believes Thor Industries (THO), Winnebago (WGO), Camping World (CWH), Brunswick Corp (BC) and Marine Max (HZO) are the best ways to capitalize on both the changing interest rate environment and on the recent dip in the market since last week.

“They are far and away the best ‘soft landing’ names in our group and have only gotten more attractive on a relative basis following more of a ‘risk-off’ unwind,” Hardiman says.

The downside, however, is if the Fed can’t pull-off a soft-landing but rather a hard-landing that sends the economy into a recession and consumers into hibernation. No amount of cheap financing can entice a cash-strapped consumer to fork over six figures for a purely discretionary item.

“Clearly, leisure demand would be negatively impacted by a deep or protracted recession, either of which would likely send each stock in our coverage lower, with declines likely undiscerning, which was arguably the case over the past week,” Hardiman says, with an obvious reference to the number of times “consumer downturn”, “cautious consumer”, and “consumer weakness”, were mention on earnings calls last week (6, 33, and 22 times, respectively).

But if the Fed is successful, any rate cuts will benefit consumer sentiment, Hardiman says, adding that “2025 will bring further improvement in affordability as rates continue to move down.”

More on Winnebago

• Winnebago Industries: Slump In Motorhome RV Sales Affecting Growth
• Winnebago Industries: No One Wants RVs Anymore
• Winnebago Industries, Inc. 2024 Q3 - Results - Earnings Call Presentation
• Winnebago sees drop in revenue and profit in FQ3 amid 'challenged' industry backdrop
• Winnebago Q3 2024 Earnings Preview