Analysts: Brunswick weathering market

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Investment analysts say Brunswick Corp. is doing well despite the weak market, but they remain cautious and unsure about the industry’s overall recovery.

“Brunswick is performing admirably under challenging conditions,” said Tim Conder, managing director of leisure equity research for Wachovia Capital Markets, in a report following Thursday’s earning’s release.

Ed Aaron, director of equity research for RBC Capital Markets, agreed.

“The company continues to execute relatively well despite weak industry conditions,” said Aaron.

Both analysts said Brunswick revenues of $1.2 billion for the 2008 second quarter came in above expectations.

However, Conder said, “Fundamentals remain difficult.”

Inventories remain elevated at 62 percent of sales, he explained. Conder also noted that marine industry conditions “remain very challenging in the U.S. and are beginning to slow in Europe.”

Also, citing the Chapter 11 filing by Olympic Boat Centers, analysts said U.S. dealer bankruptcies will likely accelerate in the second half. Conder said the issue here would be the impact of retail repossessions and troubled dealer inventory auctions negatively impacting a more limited pool of retail demand.

Analysts say the broader question is: What will be the shape of the U.S. marine recovery?

“We feel the answer to this is more gradual and protracted than most anticipate with [the second half of 2009] the earliest for stabilization in the U.S. marine market and ’10 the earliest for the beginning of a sustainable gradual recovery,” said Conder.

“The acceleration of the decline in the U.S. boat market as dealer inventories swell heading into the offseason, leaves us cautious nearer-term,” said Aaron from RBC. “Restructuring and production furloughs address primary issues, but accelerating weakness leaves us cautious on [the second half].”

— Melanie Winters
m.winters@tradeonlytoday.com

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