Ahead of the Bell: RV makers downgraded

Robert W. Baird and Co. analyst Craig Kennison said in a note to investors that falling oil prices have helped boost shares by as much as 24 percent since late August.

But the industry continues to suffer from poor fundamentals, including weak demand, failing dealers and manufacturers and tighter credit, Kennison wrote.

"We see downside risk to our estimates and would look to exit on recent strength," he wrote.

Since late August, shares of Winnebago Industries Inc. and Thor Industries Inc. are up 24 percent, Kennison said.

"We think it is too early to invest in the cyclical recovery given our pessimistic near-term outlook," he wrote.

Checks of dealers, Kennison wrote, support a bleak near-term outlook. Traffic is down and retail sales are off. Shipments, he wrote, were down 46 percent in August with motorhomes off 67 percent and towables down 41 percent.

"Dealers have no appetite to replenish inventory, which is barely turning," Kennison wrote. "As the primary season ends, we see no signs of recovery."

The analyst expects more dealers and manufacturers to exit the market during the off season, but survivors such as Thor and Winnebago will benefit from increased share as competitors exit, he wrote.

Kennison downgraded Thor and Winnebago to "Underperform" from "Neutral." He also reduced his rating on Monaco Coach to "Neutral" from "Outperform."