Analyst: Positive MarineMax news will help Brunswick

ST. LOUIS — After Brunswick’s largest customer MarineMax reported better than expected fourth quarter earnings, Wells Fargo analyst Timothy Conder said the news supports his group’s Outperform rating for Brunswick.

Conder’s analysis noted the following developments from MarineMax’s latest financial report: the company scored its first quarterly gain in same store sales in over two years; sales were up across all regions in the quarter, and especially strong in Florida; sales gains largely driven by aggressive pricing, which the company does not view as sustainable; margins appear to be holding up on ’09 product; the average selling price per unit was over $110,000; the recent Fort Lauderdale boat show was a good show, especially for big boats; retail financing has incrementally improved; core custmers seem to be in a wait-and-see mode and still largely on the sidelines; dealer failures are likely to continue for the industry; and MarineMax stores that closed were largely smaller locations with other locations close by.

Conder also noted that MarineMax believes it is leading the industry in inventory reduction, although inventory levels have come down for all dealers and manufacturers across the industry.

In addition to positive comments from MarineMax, Conder pointed to several factors he says bode well for Brunswick: Conder believes risks of further production cuts are largely behind, with 2010 production estimated to be +85%; he says Brunswick’s new operating cost structure should allow for enhanced profitability at lower production levels; and Conder thinks as a low cost producer with relative financial strength and 44 percent international exposure, Brunswick is well positioned to gain domestic/international market share, mitigating risks of an elongated U.S. recovery.

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