RBC Capital cuts Skyline stock target to $82, maintains rating

On Wednesday, RBC Capital Markets issued an update on Skyline Corporation (NYSE: SKY), reducing the company’s price target from $96.00 to $82.00, while keeping a Sector Perform rating on the stock. The adjustment follows a quarterly earnings report that fell short of expectations, primarily due to lower gross margins and a challenging demand environment. According to InvestingPro data, the stock has declined nearly 20% in the past week, with current gross margins at 25.14%.

Skyline Corporation, a producer of manufactured homes and modular housing, reported a margin-driven miss in its fiscal fourth-quarter results and provided guidance for the first quarter that suggested ongoing margin pressure. Despite the challenges, InvestingPro analysis shows the company maintains strong financial health with more cash than debt on its balance sheet and sufficient liquidity to cover short-term obligations. Analysts at RBC Capital noted the results were disappointing when compared to market expectations, reflecting a broader housing market weakness and new gross margin percentages (GM%) realities. The company’s near-term GM% is now approximately 25-26%, with a long-term range remaining at 26-27%.

The report also highlighted that while demand in the community housing segment offers some support, it is also contributing to lower margins. Additionally, the core manufactured housing (MH) demand weakened sequentially due to increased competition in certain markets. RBC Capital mentioned that potential tailwinds from the Federal Emergency Management Agency (FEMA) have not materialized as expected. For deeper insights into Skyline’s competitive position and financial health, investors can access comprehensive analysis through the InvestingPro Research Report, which includes detailed industry comparisons and expert analysis among 1,400+ top US stocks.

The analyst stated, "We lower our FY’26 EBITDA estimate by 17% to $273 MM following the F4Q margin-driven miss and F1Q guide which called for continued margin pressure and a weaker demand backdrop." Despite the lowered price target, RBC Capital maintains its Sector Perform rating, indicating that the risk/reward profile for Skyline Corporation shares is balanced. The statement concluded with an acknowledgment that the stock’s decline on Wednesday was roughly in line with their revised estimates, leading to the updated price target of $82.00. Based on InvestingPro’s Fair Value analysis, the stock appears to be trading near its fair value, with current EBITDA at $252.23 million and a P/E ratio of 23.35x.

In other recent news, Champion Homes reported its fourth quarter fiscal 2025 results, which revealed mixed outcomes. The company achieved revenue of $593.9 million, representing a 10.7% increase year-over-year, but this figure fell short of analyst expectations of $600.94 million. The adjusted earnings per share were $0.63, missing the consensus forecast of $0.78. U.S. home sales for Champion Homes rose by 5.1% to 5,941 units, and the average selling price increased by 5% to $94,300. The company’s gross profit margin saw a significant expansion to 25.7% from 18.3% in the previous year. For the entire fiscal year 2025, Champion Homes reported net sales of $2.5 billion, marking a 22.7% increase from fiscal 2024, and adjusted EBITDA rose by 16.2% to $285.1 million. The company concluded the quarter with $610.3 million in cash and cash equivalents and repurchased $20 million of shares under its existing buyback program. Despite these developments, Champion Homes did not offer specific guidance for the upcoming fiscal year in its earnings release.

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