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On Monday, JPMorgan analyst Matthew Boss adjusted the price target for Brunswick Corp (NYSE:BC) shares, decreasing it to $61.00 from the previous $66.00 while maintaining a Neutral rating. The stock, currently trading at $57.71, sits near its 52-week low of $54.97, having declined nearly 29% over the past six months. InvestingPro data shows 12 analysts have recently revised their earnings estimates downward, with analyst targets ranging from $64 to $90. Boss noted that quarter-to-date boat retail demand has been flat year-over-year, aligning with projections for flat retail sales through fiscal year 2025, with a greater than 10% decline expected in fiscal year 2024. The premium segment was highlighted as a leader, with early signs of value demand observed at the Düsseldorf boat show held from January 18-26.
Management has not reported any significant delays or order cancellations from dealers, although they anticipate wholesale units sold to lag behind retail by approximately 1,000 units. Brunswick’s Chief Financial Officer, Ryan Gwillim, indicated additional tariff pressures of around $50 million, which is on top of an estimated $35 million already factored into the fiscal year 2025 outlook. The company, with a market capitalization of $3.8 billion and a P/E ratio of 12.7, maintains a "Fair" overall financial health score according to InvestingPro’s comprehensive analysis, which includes detailed metrics and insights available in the Pro Research Report. This is a revision from the initial estimate of $65 million in incremental tariffs mentioned on March 4, with a $15 million difference resulting from savings on products compliant with the United States-Mexico-Canada Agreement (USMCA) from Mexico and Canada. This tariff impact is expected to contribute to fiscal year 2025 earnings per share (EPS) at the lower end of the current guidance range of $3.50 to $5.00, falling below the consensus estimate of $4.14.
Looking forward, management pointed out that retail units sold are at trough levels, with last year’s sales of roughly 140,000 units nearing the post-global financial crisis low of 133,000 units. Despite recent challenges, including an 18% year-over-year revenue decline, InvestingPro analysis reveals the company maintains strong fundamentals with a current ratio of 1.65 and an Altman Z-Score of 3.96, suggesting financial stability. Subscribers to InvestingPro can access over 30 additional financial metrics and exclusive ProTips for deeper insight into Brunswick’s performance and outlook. They also highlighted that the average lifespan of boats is 35 years, with about 70% of the current 10 million boats in the U.S. considered due for replacement, suggesting a potential increase in retail sales. If the industry begins to recover to mid-cycle levels, with unit sales reaching 160,000 to 170,000 in the coming years, Gwillim sees an opportunity for operating margins to rebound to the low-to-mid teens. This is in contrast to the consensus margin forecast of 9.6% for fiscal year 2027 and the company’s own fiscal year 2025 outlook of 7.5-9.0% EBIT margins. This perspective is based on management’s Investor Day plan from September 15, 2023, which anticipated a recovery to 180,000 U.S. boat units by fiscal year 2027 and an operating margin expansion to approximately 16%.
In other recent news, Brunswick Corporation has faced a revision in its outlook from stable to negative by Fitch Ratings, although the company’s Long-Term Issuer Default Rating and senior unsecured ratings remain at ’BBB’. This change reflects challenges in the macro environment, such as managing operational flexibility and inventory. Brunswick’s EBITDA gross leverage rose to 2.9x at the end of 2024 and is expected to increase in 2025. The company plans to address demand headwinds by reducing debt and limiting share repurchases and capital expenditures.
Meanwhile, Brunello Cucinelli reported strong financial results for Q4 2024, with revenues reaching €1.278 billion, a 12.2% increase, and a net profit of €128 million, reflecting a 19.5% rise. The luxury brand plans to double its production capacity by 2033, aiming for a 10% revenue growth in 2025 and 2026. Brunello Cucinelli is expanding its global footprint with new store openings, particularly in Asia, the Middle East, and North America. The company maintains its pricing strategy with an average increase of 3.5%, expecting further growth from product mix improvements.
These developments indicate Brunswick’s strategic focus on operational efficiency and Brunello Cucinelli’s emphasis on maintaining exclusivity and craftsmanship while expanding its market presence.
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