Analyst sees boost for Brunswick and industry

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Wells Fargo Securities senior analyst Timothy Conder says the U.S. marine industry could be up more than 10 percent year-over-year in 2012, with the global industry up 4 or 5 percent.

Conder’s remarks were in an Aug. 6 equity research report about Brunswick Corp.

“Brunswick is well-positioned to profitably gain domestic and international share in a slow-growth environment,” Conder wrote.

That’s because of historically low inventories that should produce year-over-year growth, a new operating cost structure providing enhanced profitability at materially lower production levels and having a strong dealer network with diverse global sales, Conder wrote.

As a result, Wells Fargo raised its earnings estimate for Brunswick stock and reiterated its “outperform” rating.

Wells Fargo raised 2012 earnings-per-share estimates to a range of $1.45 to $1.60 (up from $1.30 to $1.50) and raised 2013 estimates to $2.27 from $2.11 and 2014 estimates to $2.54 from $2.44.

The outperform rating and a $29-to-$31 valuation range for Brunswick stock was unchanged.

Brunswick’s new emerging cost structure should allow for improved profitability at materially lower production levels, due in part to a consolidation of aluminum manufacturing plants and fiberglass divestitures, according to the analysis.

U.S. marine industry dynamics should keep a relative floor under new-boat demand, Conder wrote, because of high demand for dwindling used-boat inventory and an aging fleet.

“Admittedly, recovery in the domestic marine industry will likely be gradual and elongated,” considering the highly discretionary nature of boats, the unknown degree that “fire sale” industry clearance discounting in 2008 through 2010 pulled forward demand, the likelihood of slower-than-normal income growth and potentially higher taxes, and the need to rebuild wealth among the industry’s target demographics, Conder wrote.

“However, based on the company’s restructuring moves, we believe Brunswick continues to further enhance its position as the industry low-cost manufacturer,” Conder wrote.

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