DENVER – RBC Capital Markets Analyst Edward Aaron released an investment note today reaffirming his confidence in Brunswick Corporation’s stock value.
According to the note: “While this opinion is partly based on our view that the boating market is unlikely to contract much more (if at all), the more important points are that: 1) despite attestations to the contrary, an industry mix shift toward smaller boats is not bad for Brunswick; and 2) Brunswick’s future earnings will likely be much less sensitive to negative changes in boat demand compared to past cycles.”
Brunswick recently sold its Sealine brand of boats to a U.K. investment company, The Oxford Investment Group, for an undisclosed amount.
Aaron points out that the majority of Brunswick’s earnings and value lie in its engine and fitness divisions, which are performing better than the current boat market.
“Both businesses have high barriers to entry and reward good technology and innovation,” he writes. “Brunswick also holds dominant market positions in each of these businesses. Focusing on these businesses provides an understanding of why a mix shift toward small boats doesn’t actually hurt Brunswick and why Brunswick is a less cyclical business than investors commonly perceive.”