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Monaco Coach Motors Along
By Will Ashworth, Motley Fool
Wed Jun 9, 2004

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While driving along the superhighway, I happened to pass two or three behemoth road warriors, known as recreational vehicles (RVs). I shook my head in disbelief that a gas-guzzler like that could still be on the road given that pump prices are upward of $2.00 a gallon. Was I missing something? Do these beasts run on water or some other cheaper form of fuel? The answer is no. They are powered exactly as they were five years ago, and they'll probably be powered the same way five years from now, averaging somewhere between 7 to 10 miles per gallon.

The explanation for this purchasing phenomenon is demographics. More and more people are retiring before they hit the age of 65. This has provided the RV industry with a massive group of potential customers seeking to enjoy their retirement years in comfort and style while seeing parts of the country they didn't have time for in their prime working years. However, is wanderlust a good enough reason for people to part with their hard-earned savings, especially when fancy vehicle prices can run upward of a million dollars?

Apparently, it is. Monaco Coach of Coburg, Ore., is one company that believes its product offerings will be in demand regardless of gas prices. It is the largest producer of Class A diesel motor homes in the country, with 30% market share, and the second-largest manufacturer of Class A motor homes (when counting both diesel and gasoline), with 18% market share. Only Fleetwood Enterprises has more with 21.5%.

Why is there so much optimism at Monaco? With the economy finally getting on its feet again, people are looking to enjoy life a little. What better way than in a home on wheels?

Monaco's target market is retirees and those nearing retirement age. These customers are brand loyal and will own three to five different vehicles over their lifetimes, changing them every three to five years and usually upgrading each time to a newer and swankier version. The company's latest first-quarter report shows that the factories are working full steam ahead to meet this demand.

The firm sold 32% more vehicles this quarter compared to last, and more important, the jump resulted in an earnings per share increase of 166%. When compared to earnings per share from the first quarter of 2002 -- the highest in company history -- they were up a respectable 21%. Very good news for understandably concerned shareholders.

With the population of 45- to 74-year-olds set to grow 35% in the next five years compared to 13% for the general population, it appears more and more people will be looking to Monaco and the open road. That's great news for the company -- and its shareholders.

Fool contributor Will Ashworth lives in the Great White North. He does not own any of the stocks mentioned here.

This article was provided by The Motley Fool, www.fool.com