NEW YORK – Banc of America has initiated coverage of Brunswick Corp. with a neutral rating, predicting the company’s marine business will continue its momentum through the 2005 financial year with acquisitions and vertical integration, the financial institution said in a release yesterday.
However, Banc of America said it did have concerns relating to Brunswick’s sales of outboard engines to external customers.
“Sales of outboards and related products and accessories to independent boat builders and dealers account for about 17 percent of BC’s total revenue,” Banc of America wrote in its press release. “Several factors may impact external outboard sales, including poor ratings, competition, legal issues and industry backlash.
“Our survey of independent boat builders indicates that lower orders of outboards could dampen the momentum of BC’s marine business – 33 percent of the 30 independent boat builders surveyed indicated they would seek alternative suppliers to BC in the future. A 5-percent decline to our outboard engine and associated P&A estimate to external customers would impact our FY05 revenue estimate by about $50 million and EPS by $0.03-0.04.”
Banc of America said it also expects revenue growth to decelerate and margins to contract for leisure industries in 2005 due to rising commodity and transportation costs.
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