B. Riley & Co. expanding its coverage of boating industry

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B. Riley & Co. will add West Marine and Marine Products Corp. to the list of marine businesses the company’s analysts will cover in an effort to shed light on the “under-followed” boating industry’s nuances.

“We really have branded ourselves by finding under-followed and misunderstood industries,” senior analyst Jimmy Baker told Trade Only Today. “Here you have an industry that’s somewhat under-followed. Some of our competitors might paint the leisure space in totality with a broader brush, and we think there’s more nuances in the marine industry, where you have some interesting and distinct product cycles taking place.”

The pontoon boom, in particular, “somewhat at the expense of the sterndrive segment,” has helped create some of those nuances, he said.

“I think there are actually a multitude of factors that have resulted in a shift out of that category,” Baker said. “One is, you’ve seen some pretty significant evolutions in the outboard products, both in the outboard propulsion itself and in the aluminum and pontoon boat product.”

A more value-conscious consumer contributed to the shift, Baker said.

“If you take into account the people-per-dollar spent on a boat, the ratio is greatest on a pontoon,” Baker said. “For under $20,000, you can fit three generations on the boat. I also think the aging of baby boomers and that demographic shift has fueled the demand for pontoons. We look at it not as an exodus from boating, but as a mix of factors.”

Used-boat sales data reflect the large number of sterndrive boats built and sold before the recession, Baker said. “In terms of new-boat preference, it has clearly gone the way of outboards.”

Mercury’s planned shift to build its own sterndrive engine blocks could create opportunities to “reinvigorate and reemphasize” the market over the coming year or two, Baker said.

“That kind of innovation is the catalyst to reinvigorate a challenged market,” Baker said.