Survey: Brunswick dealers see boost in sales

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A B. Riley & Co. LLC survey this month of 54 North American non-MarineMax Brunswick Corp. boat dealers showed sharp improvement in sales and sentiment.

Because of the results B. Riley is reiterating its “buy” rating and a $38 price target on Brunswick stock. Brunswick shares closed at $22.45 Monday, up 0.19 percent from Friday.

“Brunswick controls several best-in-class assets that should allow it to grow faster than its end markets while driving excellent returns,” senior analyst Jimmy Baker said in a report covering the findings.

“The company has revolutionized much more of its core marine businesses, emerging from the marine industry depression with a leaner, more agile business model,” Baker wrote. “In sum, we expect Brunswick to rapidly grow earnings in the absence of an economic tailwind, primarily via capital structure improvement and the release of pent-up market demand.”

The report shows that Brunswick dealers surveyed saw an 11 percent increase in new-boat sales in the second quarter, compared with the same period a year earlier.

Despite trade-down dynamics, dealers reported surprisingly healthy sterndrive sales, Baker wrote, with only 21 percent reporting sales in that segment dropping year over year.

“While our survey suggests BC dealers are doing slightly better at retail than we previously expected, we are maintaining our estimates, given tepid inventory appetites and macro uncertainty,” Baker wrote.

Just 10 percent of dealers saw year-over-year declines in new-boat sales and more than a third saw increases of at least 10 percent, the report showed.

Dealers often were frustrated with limited availability in several popular Mercury outboard models, Baker wrote. They also reported long lead times for certain boat models, some of which have been corrected, Baker wrote.

“Longer lead times appear to be a permanent shift in the industry for larger sterndrives and inboard cruisers,” Baker wrote, because neither OEMs nor dealers want to stock these in volume or variety. “But BC ought to be able to improve lead times for outboard boats and motors over time, in our view.”

“BC remains a compelling earnings growth story, but we continue to believe investors are wise to temper their expectations for sales growth,” Baker wrote.