Unlock: Patrick Industries (PATK) – Strong RV Industry Checks Pays Off
It pays to do fundamental research. This bullish view was presented to clients on October 16 with stock at $62. Now at $76. Similar bull case was provided on other Recreational Vehicle (RV) on THO and WGO. To learn more about our approach and how you can become a successful trader, sign up for 2 week trial and test drive live chat room with some of the best traders: SUBSCRIBE
October 16, 2016
Patrick Industries (PATK) – On September 28th, the Recreational Vehicle Industry Association (RVIA) announced that RV wholesale shipments to retailers rebounded in August after a lower-than expected July report. Monthly shipment totals for August were 35,946 units, a rise of 26.8% over last month and 31.5% ahead of August 2015. According to the RVIA, this was the largest August total since 1977. Year-to-date totals have reached 290,582 units, an increase of 13% over the 257,089 units shipped during the same eight-month period last year. Motorhomes posted a strong percentage growth (16.8%) with 37,128 units shipped. The towable category boasted a larger volume increase with shipments reaching 253,454 units on 12.5% growth. (Figure Breakdown Below)
The RVIA’s outlook for the RV market projects that RV shipments will end the year above 405,000 units and increase again in 2017 to 411,000 units.
Most investors will gravitate to the likes of Winnebago Industries (WGO) and Thor Industries to take advantage of this trend. However, I want to bring to your attention a company called Patrick Industries (PATK), which manufactures and distributes building products and materials for the recreational vehicle market. This specific segment makes up 76% of the company’s revenues. Within this segment, it supplies decorative vinyl and paper laminated panels, granite and quartz countertops, cabinet doors, hardwood furniture, fiberglass bath and shower fixtures, etc. The end of 2015 wrapped up the company’s 6th consecutive year of wholesale unit shipment growth, with 2016 Q2 results show shipments growing by 12% year to date. Patrick Industries believes that its new innovative designs and products are appealing to all age groups, even attracting younger buyers.
According to more statistics provided by the RVIA, one in ten vehicle-owning households between 50 and 64 own at least 1 RV. The highest rate of ownership, though, comes from babyboomers. 11,000 of these baby-boomers are projected to turn 65 years old each day over the next 15 years. Putting this altogether, the number of consumers between the ages of 55 and 74 are projected to reach 78 million by 2025. The most prominent reason current RV owners have for purchasing an RV included family transitions (A typical RV family vacation is 23-59% less expensive for a family of four.
Finally, Patrick Industries is focused on bringing quality to all of its customers. Going back to 2010, the company is very tactical when it comes to acquisitions. Most of these deals are geared toward the RV market, since that this where 2/3rds of their revenue comes from. Since 2010, the company has acquired 29 different companies (Acquisition Summary Below) spread out from the Pacific Northwest to the Southeast to the Northeast. Some of its recent purchases include BH Electronics, which is major designer, engineer, and manufacturer of custom thermoformed dash panel assemblies, center consoles and trim panels, wiring harnesses, AC panels, circuit breakers, etc., as well as Vacuplast, which is a manufacturer of a wide variety of thermoformed plastic parts and components.
There’s very little sell-side coverage on this name. This year, we have seen CL King upgrade shares from Neutral to Buy on 8/17 and Sidoti initiate coverage with a Buy rating on 6/16.
