Skyline Champion downgraded at RBC as backlog droop prompts larger demand uncertainty

RBC Capital Markets analyst Mike Dahl has downgraded shares of Skyline Champion (NYSE:SKY) to Sector Carry out from Outperform because the homebuilder’s fiscal second-quarter drop in backlog prompted additional uncertainty round demand prospects by way of 2024.

The corporate stated its complete backlog fell 41% to $0.8B in Q2 vs. Q1, reflecting elevated manufacturing and a moderation of order charges as retailer’s destocked present stock on account of tightening flooring plan credit score limits.

“This resulted in basically no retail orders for the interval and in addition limits the power for SKY to ship backlog as sellers couldn’t take supply, a dynamic that can probably see little enchancment in F3Q,” Dahl wrote in a notice to shoppers.

Total, “our concern is that finish market demand will weaken as retail channel points are sorted by way of and credit score could additional tighten, limiting any rebound in orders,” he added.

In flip, the analyst lowered his 2023 income estimate to $2.59B from $2.75B. That compares with the $2.60B consensus. However, he expects adjusted EBITDA margin to be 19.6% in 2023 in contrast with 19.2% in his prior view.

The Sector Carry out ranking diverges from each the Quant’s Sturdy Purchase ranking and the typical Wall Avenue analysts’ Purchase ranking.

In search of Alpha contributor Daniel Jones, who sees SKT inventory as a Impartial decide, warned buyers to take a extra cautious strategy in the case of SKY given its cyclicality with the slowing housing market in addition to its backlog deterioration.