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Analysts bullish on Brunswick’s future

Analysts covering Brunswick Corp. say the company's first quarter results, released Thursday, were above expectations.

Brunswick reported a 15 percent increase in net sales for the first quarter, which includes a rise in sales in both the boat and engine segments.

The boat segment reported net sales of $243.6 million for the first quarter, an increase of 19 percent compared to $205.3 million in the first quarter of 2009. The marine engine segment reported net sales of $445.7 million in the first quarter of 2010, up 30 percent from $343.9 million in the year-ago quarter.

On Thursday, following the earnings release, Brunswick stock reached a 52-week high of $22.75 and was climbing this morning in early trading.

"Brunswick reported an ex-items loss of 9 cents versus consensus loss expectations of 96 cents. The real 'pin action' ... came from the engine segment, though non-marine businesses also showed upside," wrote Edward Aaron, of RBC Capital Markets. "All expense lines came in better than we forecast, but gross margin ... was primarily lower."

Aaron said he expects Brunswick to maintain "very strong margin trends for the foreseeable future" and that prospects for the second quarter look bright.

"The boat segment should benefit from higher production, a more favorable mix and reduced discounting," he added.

Tim Conder, from Wells Fargo Securities, also noted that Brunswick beat Wall Street's expectations with revenue and earnings per share. The higher than expected revenue, he noted, was driven by greater than anticipated boat and engine wholesale shipments.

He also noted Brunswick finished the quarter with "significant liquidity."

"We believe investors should approach BC shares with a cycle investment mindset and apply a 12x multiple to peak earnings power," Conder wrote in his analysis. "In our view, volatility will continue to offer opportunities within the broad cyclical uptrend to add this value cyclical name to portfolios."

Click here for Aaron's full report.

Click here for Conder's full report.

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