Analyst expects economic slowdown to hurt boat sales
SAN FRANCISCO – Banc of America Securities analyst Gary Cooper expects slowing consumer spending and higher commodity prices to have a negative impact on boat sales in the fourth quarter of the year and into next year, according to a report released yesterday.
Cooper predicts a further deceleration in consumer spending for the next five quarters, which could mean a slow 2006 for the marine industry.
While he suggested declining steel prices may help powersports companies improve their gross margins, aluminum prices, which continue to be up over the prior year, may offset this somewhat.
Cooper said steel accounts for 2 to 3 percent of Brunswick’s revenues, while aluminum accounts for 3 to 5 percent.
Brunswick may cut FY06 estimates
While Banc of America expects Brunswick to exceed consensus EPS of $0.73 and meet Cooper’s estimate of $0.76 for the fourth quarter, it anticipates that Brunswick might lower its estimates again soon.
“We believe Brunswick’s recent earnings reduction of 3 to 4 percent may not be sufficient to account for weakening demand in the boating off-season,” wrote Cooper. “Thus, we expect Brunswick to potentially lower its guidance in late FY05 or more likely FY06.
Cooper suggests that while “Brunswick’s high-end boat brands continue to perform well and will likely drive sales results in 3Q05,” “at least four of BC’s recently acquired boat brands (Crestliner, Lowe, Lund and Sea-Pro), which had original engines replaced by Brunswick’s, are experiencing poor sales and losing market share.”
He believes this may be due to “low consumer acceptance of Brunswick’s new engines (Mercury, Verado) installed in these brands.”
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