Buyback Wednesdays – Thor Industries Plans To Repurchase 10% Of Its Shares

Stock buyback announcements slowed down last week on account of an earnings related lull, with 18 companies announcing buybacks. The most significant one in absolute dollars terms was NIKE (NKE), announcing a $18 billion buyback representing around 10.35% of its market cap at announcement. The buyback was a bright spot in otherwise lackluster fiscal Q4 2022 earnings for Nike, which saw sales drop almost 1% year-over-year to $12.23 billion on account of declining sales in China and inventory levels build up 23% to $8.4 billion. Darden Restaurants (DRI) and Chesapeake Energy Corporation (CHK) announced buybacks of $1 billion each representing around 7% and 9.6% of their market caps at announcement respectively.

After passing the Federal Reserve’s stress test and emerging as one of the stronger U.S. banks, Morgan Stanley (MS) not only announced a 11% increase in its dividend but it also announced a $20 billion buyback representing nearly 15% of its market cap at announcement. Only Charles Schwab, Discover and State Street had better stressed ratios than Morgan Stanley as you can see from page 15 of the stress test results.

The buyback announcement that stood out the most was by the RV manufacturer Thor Industries (THO). This is the second buyback announcement by the company in a little over six months and the size of this buyback is much higher than its previous $250 million announcement. We have also seen a number of insider purchases at the company in recent months and wrote the following about Thor following an insider purchase by its co-founder Peter Busch Orthwein in January,

“We like companies where the company is buying back its own stock and the insiders are also buying stock with their own money. We track these types of companies through a custom screen called The Double Dipper. The RV manufacturer Thor Industries (THO) was founded in 1980 through the acquisition of Airstream by Wade F. B. Thompson and Peter Busch Orthwein. Thor is the Norse God of thunder and lightening and also the word formed from the first two letters of each co-founder’s last names. Mr. Orthwein was previously the Chairman of Thor Industries and is now on the Board of Directors.

For the first time in over a decade of tracking insider transactions, we saw Mr. Orthwein purchase 10,000 shares of Thor last month at an average price of $103.41. He purchased an additional 10,000 shares last week at an average price of $98.54 right before the bottom fell out of the market and Thor declined more than 12% to a fresh 52 week low. Besides Mr. Orthwein, two other insiders also purchased shares during the last month. The company announced a $250 million share buyback on December 21, 2021 and increased its dividend for the 12th year in a row during fiscal 2022 ending in July 2022. The dividend yield is just shy of 2% at a payout ratio of 11.64%. The payout ratio is very low because the company had some unusually strong quarters during the pandemic as consumers shifted their travel preferences from flights, cruises and hotels to RVs.

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