Brunswick Corp. announced it will repay $200 million of its revolving credit line drawn in March as a precaution during the coronavirus pandemic.
The company announced it was drawing the credit line in March to increase its cash position and to enhance its liquidity and financial flexibility during a period of substantial uncertainty.
“Today, with a clearer view of the marine market and the confidence in the execution of our plans, we feel that this move is in the best interest of our company and our shareholders,” said incoming Brunswick CFO Ryan Gwillim in a statement. “While there remains uncertainty over the long-term economic impact of the COVID pandemic, we feel that this action best balances the recognition of that risk with the positive near-term, post-lockdown demand patterns that have been evident in our boat, engine and parts and accessories businesses.”
Barron’s highlighted Brunswick Corp. as a stock pick for investors, noting that stocks for manufacturers of outdoor-recreational companies — RVs, for example — have risen 20 percent while marine stocks have lagged.
“At a recent $60 apiece, shares of the Mettawa, Ill.–based boat maker have been dead in the water this year,” wrote Al Root in an article that appeared in the publication over the weekend. “Yet a combination of internal and external factors, from a product-mix shift to rising boat demand, could help drive the stock higher from here.”
At first glance, Brunswick might look risky, Root wrote.
The pandemic has taken a toll — sales are expected to be down 12 percent this year, the pubslication noted.
Though the company has had “a poor track record” in prior recessions, today Brunswick has refocused on boats and shed business units like billiards and bowling.
“Brunswick used to be a hodgepodge of leisure brands,” James Hounsell, associate portfolio manager at Centerstone Investors, which owns the shares, told Barron’s. “Now, it’s a way better business.”
Brunswick shares are trading at 14 times 2021 estimated earnings, well below most other outdoor leisure stocks. In comparison, players in the RV world are trading at about 20 times 2021 estimates, near the valuation of the S&P 500 Index, wrote Root.
“At an RV-company multiple, its stock would be priced nearer to $90, implying 50 percent upside from here,” Root said.