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Analysts: Brunswick beat 2Q forecasts

Industry analysts say Brunswick's earnings report last week was better than expected, with the company reporting its first quarterly net profit since the first quarter of 2008.

Brunswick last week reported a 41 percent gain in total net sales for the second quarter of 2010, with both the boat and engine segments reporting large increases.

The company reported total net sales of $1.01 billion, up from $718.3 million in the same period last year. Net earnings of $13.7 million, or 15 cents a diluted share, contrasted with a net loss of $163.7 million, or $1.85 a diluted share, for the second quarter of 2009.

"Brunswick reported a significant upside quarter, further demonstrating the leverage in the model. [Earnings per share] of 15 cents were slightly below our 18 cents forecast, but well ahead of the consensus estimate of a loss of 3 cents," noted analyst Edward Aaron of RBC Capital Markets, who also said the "upside" came from strength in sales in the engine and fitness segments.

Timothy Conder, a senior analyst at Wells Fargo Securities, said Brunswick's second-quarter revenue surpassed his and Wall Street's expectations.

"We continue to applaud management's execution in what has likely been one of the worst marine downturns in history," he wrote. "We believe Brunswick is well positioned to expand its lead ... in the industry as a modest recovery unfolds in '11. Our industry/lending sources indicate that the majority of remaining industry overhang (non-current new boats) should be cleaned up during the April-September key sales season. We believe Brunswick will continue to be cautious with its production in [the second half of 2010]."

"The outlook for next year is (gulp) retail-dependent," Aaron added. "The 2010 story has been about the leverage associated with a wholesale-driven sales recovery. Next year's growth will be highly sensitive to changes in retail trends. This is a tougher call and one that will be difficult to make until closer to next year's selling season. While we do not yet see much evidence of demand turning, we are intrigued by the prospect of improved new boat sales resulting from recent absorption of used boat inventory. Our current 2011 forecast assumes flattish retail sales."

RBC and Wells Fargo are maintaining their "outperform" rating on Lake Forest, Ill.-based Brunswick.

Brunswick stock opened trading this morning at $17.39 per share.



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