LCII - LCI Industries downgraded at Roth MKM after earnings disappointment

LCI Industries ( NYSE: LCII ) was cut to a Hold-equivalent rating at Roth MKM after the aftermarket business came in softer than anticipated in the company’s latest earnings report.

Equity analyst Scott Stember told clients that while an RV slowdown was anticipated, the aftermarket business was not the “cushion” for the business that he anticipated.

“It has now become apparent to us that the business is not as counter cyclical as we thought,” he wrote. “Furthermore, rapidly falling demand for new RVs has further diminished the need to up-fit these vehicles.”

Stember trimmed his EPS estimates for the full year and tempered margin expectations. Inventory write downs are also expected to have a significant impact on earnings power into 2023.

“We don't think the Street is adequately factoring in building headwinds emanating from a rapid increase of used inventory and resulting falling values,” he concluded.

Stember trimmed his price target to $114 from $137 alongside the downgrade to Neutral from Buy.

By contrast, Baird analyst Craig Kennison raised his outlook despite the downbeat earnings result. He raised his price target to $130 from a prior $120 and reiterated an outperform rating.

“We expected a rotation to early-cycle stocks at some point in 2023, but the pivot happened sooner than anticipated with LCII up 26% YTD, well ahead of the S&P 500,” Kennison commented. “Net, we would not be surprised if traders took profits after a strong run, but patient investors should be encouraged now that LCI shares are in an uptrend for the first time in over a year.”

Read more on the details of the recent earnings results .

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