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Analyst revises outlook on 2010 Brunswick shipments

Wells Fargo Securities is now estimating retail boat sales for 2010 will be down 15 to 20 percent for the year, resulting in Brunswick's wholesale shipments for the year coming in at 23,000 to 25,000 units versus prior estimates of 25,000 to 27,000 units.

Brunswick's domestic 2010 retail sales will likely approximate or slightly exceed that of the industry.

"Entering '10, [Brunswick] had one of the cleanest channel inventories in the industry, in our view," senior analyst Timothy Conder said in a report. "The issue for '10 was clearance of competitive product. While we believe this will still be largely accomplished given the already planned delay of [model year] '11 shipments until October, the likelihood of some modest residual carryover of competitive product to '11 has clearly increased."

In May, fiberglass boat sales declined 23 percent year-over-year versus a 14 percent decline in April, according to Statistical Surveys. In May, year-to-date retail sales were down 17 to 20 percent.

Historically, the second quarter accounts for 43 percent of annual retail unit sales, Conder noted, while the third quarter generally accounts for 31 percent.

Several factors could account for weaker-than-expected sales, including only modest improvements in retail credit availability/affordability; weakening consumer confidence; uncertain sustainability of European demand; the impact that expiring tax cuts and health care taxes will have on the demand for higher-end boats (the $250,000-plus-income customer) and the Gulf oil spill.

"We believe a best-case scenario of peak cyclical industry retail demand is now in 2014-2015," Conder said.

"One last thought, in the last up cyclical ('01-'05), [Brunswick's] stock initially ran from $16 to $30, retreated to $18, ran to $45, then pulled back to $35 before making a final cyclical peak at $50," he added. "While history never exactly repeats itself, we believe it highly likely that we have completed the first leg of the cycle uptrend for the stock and are in the initial pullback wave."

Brunswick's stock opened this morning at $12.67 per share after closing Tuesday at $12.82 per share. Its 52-week high and low are $22.89 and $3.49.



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