Fyra fynd bland husbilar och båtar

It might be time for investors to hit the open road—or the open seas.

Interest rates have dropped enough that recreational vehicle and boat sales could pop, Citi says. That could turn RV maker Winnebago and a few other select stocks into winners.

As interest rates steadily climbed starting in March 2022, so did the cost of loans to purchase these homes on wheels and recreational watercraft. But last month, Federal Reserve Chairman Jerome Powell signaled the central bank is prepared to lower the federal-funds rate if needed, and recent economic data have investors all but certain of a September cut. Fixed-income markets reflect that possibility, with bond yields across the board moving a bit lower.

Already, borrowing rates for RVs and boats have declined slightly to just over 11% from their peak of above 12%. Citi expects these rates to drop another few percentage points.

So the overall cost to purchase RVs and boats will become far more tolerable, all while consumers’ discretionary income should keep growing at a moderate pace.

The share that monthly interest and RV payments took up of discretionary income, on average, has dropped to about 13% this year, from just over 15% in 2023, according to Citi. The team sees it falling to just over 12% of discretionary income in 2025. Essentially, incomes should keep growing, while product prices and interest rates decline, making these luxuries more affordable.

That should lift sales for RV makers Winnebago Industries and Thor Industries . The consensus analyst estimate for the two companies’ combined sales this year is about $13.4 billion, according to FactSet, down from last year; the number of products people bought fell off a cliff in 2023 and 2024 so far, after peaking in 2022. Next year, combined sales are expected to grow 6% year over year to $14.2 billion.

This forecast may prove conservative. Considering the percent of income represented by the total cost of owning an RV that Citi expects, the number of units sold in 2025 should jump 22%, bringing revenue higher than analysts’ projections.

Such top-line growth would likely translate into earnings growth that is far better than current estimates—right now, Wall Street pegs average earnings growth of 35% in 2025 for Winnebago and Thor. These companies could enjoy bigger profit margins as well, if costs remain mostly steady.

Such significant earnings beats would likely send the two stocks soaring. They’re down about 7% on average from multi-month peaks hit in late July, just before the entire market declined on concerns about economic growth.

Boat stocks are in the same, well, boat.

The average monthly cost for owning a boat peaked in 2023, dipped this year a touch, and could drop again next year to just over $700. That total cost—which includes interest expense—as a percent of monthly income also peaked in 2023. It came down this year, and Citi says it could drop below 14% next year. Given the correlation of that figure to the number of boat sales, a company such as boat dealer MarineMax could see the number of goods sold jump about 14% in 2025.

That would help it beat sales estimates, which call for a mere 4% growth rate to $2.8 billion in 2025. In that case, earnings would, quite simply, crush expectations. That would be great news for MarineMax stock, which has fallen 25% from a multiyear peak in late July.

Another likely beneficiary is OneWater Marine, which Citi doesn’t cover. Analysts expect 2025 sales of $1.9 billion for just 3% growth. The stock is down 27% from a multi-month peak in late July.

To be sure, interest rates are dropping because of inflation’s declining pace and economic growth worries—factors that are leading shoppers to be more discerning about where to spend their money. Rates are still high compared with early 2022, just before the Fed embarked on an aggressive campaign of rate hikes. The delayed impact of that could still weigh on consumer spending, the Citi analysts acknowledge. But as they outline, lower borrowing costs for recreational vehicles and boats could easily enable manufacturers to sail past the relatively pessimistic consensus sales estimates.

Meanwhile, Harley-Davidson may not benefit quite as much. That’s because the drop-off in boat and RV costs has recently been bigger than the decline in the cost of owning a motorcycle.

Overall, lower rates should give investors a few more stocks that let them show their wild side.