MarineMax stock target raised on reduced estimates, still a Buy

On Friday, Stifel maintained a Buy rating on MarineMax (NYSE:HZO) and increased the price target to $40.00 from $35.00. The firm adjusted its forecast for the company's fiscal third-quarter results, predicting lower earnings before interest, taxes, depreciation, and amortization (AEBITDA) and adjusted earnings per share (EPS) than previously estimated.

The revised AEBITDA is expected to be $66 million, a decrease of 22% year-over-year, with a margin contraction of 250 basis points to 9.1%. The adjusted EPS forecast is now set at $1.32, down 36% from the prior year.

MarineMax's sales projection has also been slightly lowered to $720 million, which is flat compared to the same period last year, with same-store sales (SSS) expected to decline by 1%. These figures are just below the consensus estimates of $725 million in sales and 0% SSS growth.

Despite these adjustments, Stifel believes the company's focus on the luxury and premium market segments, as well as its less cyclical storage and maintenance assets, may mitigate some of the downside risks.

The firm anticipates that MarineMax could face a potential downgrade to its annual guidance for the third time in fiscal year 2024, citing factors such as increased promotions, higher interest rates, and the costs associated with integrating recent acquisitions.

Gross margins are also expected to fall by another 170 basis points year-over-year to 32.1%, following declines in the first and second quarters of fiscal year 2024. Despite a shift towards higher margin revenue streams, such as maintenance, storage, and parts and accessories, the firm expects lower boat margins due to increased discounting.

For the full fiscal year 2024, Stifel has trimmed its estimates, now projecting an adjusted EPS of $2.19, down from $2.35, and AEBITDA of $161 million, reduced from $167 million. The firm also anticipates SSS growth of 1%, a slight decrease from the previous forecast of 2%. The date for the fiscal third-quarter 2024 report has not been announced, but for reference, last year's results were reported on July 27th.

In other recent news, MarineMax has been the subject of several significant developments. The company reported revenues exceeding $582 million in its fiscal 2024 second quarter, primarily due to strong boat sales and marina operations. Adjusted net income per share is projected to be between $2.20 and $3.20, with adjusted EBITDA expected to be between $155 million and $190 million.

In terms of leadership, Rebecca J. White, Ph.D., will assume the role of Chair of the Board on June 30, 2024, succeeding William H. McGill, Jr., who will retire. Joseph A. Watters will also retire from the Board.

B.Riley adjusted its outlook on MarineMax shares, reducing its price target to $46.00 from the previous $48.00 but maintained a Buy rating. This revision reflects concerns over a potential decline in boat demand. However, the firm believes that the recent developments involving Island Capital Group's proposal to acquire IGY Marinas and non-retail operations could be beneficial for MarineMax shareholders.

Island Capital Group LLC has publicly proposed to acquire a significant interest in MarineMax's marina-related services business. The proposal from Andrew L. Farkas, Island Capital's founder, chairman, and CEO, is seen as a potential value unlock for shareholders and could provide MarineMax with substantial cash during a challenging period for its core business.

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