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Douglas Dynamics Idea Proposal (PLOW)

Douglas Dynamics Idea Proposal (PLOW)
 

Will Douglas Dynamics sell more snowplows than a year ago?

Report Available: December 7, 2016

 

Blueshift’s initial research shows PLOW coming off a quarterly performance that fell short of last year’s record-setting numbers despite 2015’s paltry snowfall amounts. Forecasts for generous snowfall in the coming winter give reason for optimism, as do positive trends in strongly-correlated pickup truck sales. Still, a warm November, 2016 on pace to be the warmest year on record, and a production cut for Ford F-150s last month are indicators that caution may be in order.

 

Observations

  1. PLOW reported third quarter earnings with profit down 50% from the year earlier, while sales increased 2.5% year to year, which the company said was in line with expectations. Dealer inventory levels were slightly higher at the end of September compared to a year ago, also as expected. PLOW reiterated its earnings guidance for the year, which the company raised after its strong second quarter.
  2. PLOW’s Work Truck Attachment segment is highlighted by its Fisher and Western snowplows for commercial and professional use. It reported $100 million in revenue and $34 million gross profit in Q3, lower than a record-setting quarter a year ago as 20 new product were launched in 2015 amid pent-up demand. The effect of below average snowfall also continues to be felt.
  3. Predictions for the coming winter include assertions that frequent storms may bring above-normal snowfall to the northeastern U.S. The winter will start later but last longer into spring, with above-normal precipitation in the Northeast and New England, especially in February, according to the Farmers’ Almanac. And NOAA predicts more-than-normal precipitation with cooler conditions in the northern Rockies and upper Midwest this winter, though northern New England is expected to be warmer than normal. Still, 2016 is on pace to be the warmest year on record, beating out 2015 for that title. And Denver set an all-time high temperature of 80 degrees on November 16, breaking the previous record of 77 degrees set in 1941, while temperatures in Minnesota were 15 degrees warmer in the first week of November than average.
  4. On another positive note for potential strong sales of snowplows this winter, pickup truck sales data shows a 6% increase year to date from 2015 and up 4.3% in October compared to a year ago. PLOW says there is a positive correlation between pickup truck sales and PLOW sales. However, news that Ford temporarily closed its F-150 plant in Kansas City for a week in response to an expected retail slowdown gives some cause for concern.

 

How do sales of Fisher and Western snowplows this fall compare to a year ago? What does demand look like for winter? How are inventory levels? What are expectations for pricing trends? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Western dealers, Fisher dealers.

 

Companies: Douglas Dynamics Inc. (PLOW)

 

Research Begins: Nov. 21, 2016