Analyst: Talk with Brunswick supports positive view
DENVER — RBC Capital Markets recently hosted a number of restaurant and leisure companies at an investor day in Utah. At the event, analyst Edward Aaron spoke to Brunswick CEO Dusty McCoy and said the discussion provided support for his positive view of BC shares.
“McCoy reiterated his view that 2010 will likely mark the bottom of the cycle,” Aaron said in an investment note. “While boat show sales often have limited predictive value, management is encouraged by the quality of discussions between dealers and consumers and a seemingly rational competitive environment. Near term, management seems more positive on smaller boat segments. While buyers in bigger boat segments have the desire to trade up, many are still under water on their existing boats. This should change as wealth accumulates, but it will likely take time for the larger boat segments to turn.”
The company is ramping production to meet strengthening dealer demand and is encouraged by manufacturing productivity. These factors should drive the first half, Aaron said, while the risk is that retail demand does not follow, causing second half results to suffer.
Aaron said a stabilized industry environment and solidified cost structure and balance sheet enable Brunswick to focus more on growth. Management is working to better leverage its competitive advantages, especially in engines, to grow faster than the market as the recovery unfolds. This involves two primary areas of focus: Accelerating innovation while maintaining or reducing the cost of the product and capitalizing on international growth opportunities.
Boston Whaler is already reaping the benefits of strong progress on the first goal, Aaron said. Other brands, especially in the sterndrive/inboard area, need to follow Whaler’s lead. The common platform manufacturing model supports a faster pace of innovation. Also, Brunswick management sees its international business as under-developed, especially in the area of parts and accessories.
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