Thor Industries Inc. (THO) surpassed market expectations on revenues for the fourth quarter of 2018 but missed on earnings. The stock has dropped more than 12% on Thursday.

Net sales dropped 3% to $1.87 billion. In the Towable segment, net sales were flat while for the Motorized segment, they dropped 13.2%.

Net income dropped to $88.2 million or $1.67 per share from $119.4 million or $2.26 per share in the prior-year period.

Thor Industries fourth quarter 2018 earnings
Thor Industries Q4 2018 Earnings Infographic

Bob Martin, President and CEO said “Our fourth quarter results reflect the actions taken during the period to balance dealer inventory levels. We believe our reduced production levels, combined with higher promotional costs and solid retail demand, have improved the position of our dealers’ inventories as they enter the new model year and prepare for the upcoming Dealer Open House.”

During the quarter, Thor experienced higher costs due to the impacts of the new steel and aluminum tariffs. The company is taking steps to manage these factors and over time, expects to offset these increases.

Due to dealer order strength experienced in the first half of fiscal 2018, Thor is planning for tougher year-over-year comparisons in the first half of fiscal 2019 with more favorable topline growth rates in the second half of the fiscal year. The company also expects gross margin pressure to be greater in the first half of the year. During fiscal 2019, diluted EPS will benefit from a lower effective tax rate.

Earlier this week, Thor announced its plan to acquire Erwin Hymer Group, a privately-held German company and the largest RV manufacturer in Europe by revenue. The total consideration will consist of around $2 billion in cash and 2.3 million shares of Thor’s common stock.

The transaction, which is expected to be accretive to earnings in the first year, is anticipated to close by the end of the calendar year. Through this deal, Thor believes it will be able to gain access to the European market, which will provide new growth opportunities.