LAKE FOREST, Ill. – When the boating business’ biggest manufacturer cuts its outlook (See today’s news article, “Brunswick reports marine sales decline”), marine industry analysts and investors pay attention.
Not only has Brunswick’s stock taken a dive as a result, so have the stocks of the industry’s other public companies, like Marine Products Corp. and MarineMax. In addition, several analysts have downgraded Brunswick’s stock.
But the biggest question on the industry’s mind is what this means for its future – not necessarily a few companies’ stock prices. And if you put much stock in what analysts are saying, the answer isn’t good.
Not only have boating businesses felt the impact of sales declines – particularly in the lower- and middle-end of the business – so have RV and powersports manufacturers like Fleetwood and Polaris.
Together, this could be “an early warning of a wider deterioration of U.S. consumer confidence,” Reuters stated in a recent article, citing the inbalance between consumer spending growth and income growth, interest rate increases and a weakening housing market as concerns.
A.G. Edwards’ Tim Condor says there is “evidence that the slowdown seen in 1H06 boat market is the beginning of a cyclical downturn related to higher interest rates and general slowing in consumer purchasing power from what was likely an industry cyclical peak in ’05 instead of just a “pause” in industry activity weather.”
He also suggests that the economy may “further slow in ’07, which would further erode consumer confidence” and notes that “industry boat unit sales are over 70 percent correlated to consumer confidence.”
If that’s the case, the slowdown in lower-end product sales will likely creep up the income scale, hitting the boating industry square in the jaw.
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