Analyst raises expectations for MarineMax

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An analysis firm is raising its guidance of MarineMax after holding “bullish” management meetings with CEO Bill McGill and chief financial officer Mike McLamb that indicated an increase in retail lending and higher-than-expected margins would contribute positively to the company’s bottom line.

“We previously underestimated margin benefit from the new product cycle,” B. Riley analyst Jimmy Baker said after the meeting.

Specifically, the firm underestimated the margin benefit from Sea Ray’s new products, Baker wrote in a report summarizing key takeaways from the meeting.

“We may have also slightly underestimated the strength of the backlog MarineMax is building, though it has experienced some delays in initial Sea Ray deliveries,” Baker wrote, adding that some June quarter deliveries of Sea Ray’s newest models — the 350 SLX and the 510 Flybridge — have slipped into the September quarter.

“Management commentary also suggests that credit availability is becoming a modest incremental tailwind — one that we were able to successfully verify with additional channel checks,” Baker writes. “We first learned of certain zero-down programs re-entering the market in 2013.”

Now it appears that 2014 is seeing more lenders re-entering the retail lending market, including the subprime space.

“As terms become more flexible and availability improves, this expands MarineMax’s addressable market,” Baker wrote, adding that MarineMax does not finance any sales via its own balance sheet, but instead facilitates the process with partner lenders for a fee.

“Lastly, it sounds as though management has an active funnel of potential acquisition targets, though it remains disciplined in its approach to inorganic unit growth,” Baker said.

MarineMax continues to see improving activity in high ASP product, Baker says. The company continues to do well with Azimut, but it is also seeing improving order activity in Sea Ray and “is in the early innings of what could be a lucrative new relationship with Ocean Alexander.”

The firm is raising expectations slightly for fiscal years 2014-2016 — from $0.50, $1.02 and $1.57 to $0.51, $1.04 and $1.60 — while reiterating its buy rating and $20 price target.

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