Hurricanes Hammer Boating Stocks

After clambering through thickets of oil prices, hurricanes and rate hikes, investors breathed a sigh of relief at September’s close. Economic signals were mixed for the quarter ended September 30, 2004. The Commerce Department’s second-quarter gross domestic product numbers (GDP) showed growth at 3.3 percent, higher than the preliminary 2.8 percent reported in late August, boosted by greater business inventories and lower imports.
“The economic baton has passed from consumers to businesses,” said Sung Won Sohn, economist at Wells Fargo & Co. Sohn explained that consumers were not spending due to job worries, gas prices and the election, among other concerns. However, incomes are rising.
“Even though consumers are not spending, they have income,” Sohn said. “When income goes up, Americans tend to spend.”
The Boating Industry Index took a nosedive during the quarter as hurricanes continued to batter southern coastlines. The Boating Industry Index shed 227.32 points, or 9.50 percent, to end at 2166.45. Declining issues outpaced advancing issues by a 4-to-1 margin.
Polaris stock powered ahead after the company reported that it will jettison the marine portion of its business, effective immediately. Polaris said it will help dealers liquidate current inventories, but will continue to provide replacement parts, service and warranties to its customers and dealers. Polaris President and CEO Tom Tiller said, this decision is designed to foster long-term growth and shareholder value.” Tiller said that the market for the company’s PWC has been shrinking since its apex in 1996. He said that Polaris’ marine division has never been profitable, and in 2003 lost $13 million. Polaris jumped up 7.82 points, or 16.29 percent, and closed at 55.82. Polaris was our top dollar and percentage gainer.
MarineMax shed 6.16 points, or 21.48 percent, and closed at 22.52. MarineMax cut its earnings forecast for the year to between $1.43 and $1.48, down from an earlier estimate of $1.58 to $1.60. The boat retailer cited hurricane-related physical damage and a loss of boat sales during the period. It said that sales were strong through Charley, but demand dropped as Frances approached.
Brunswick Corp. enjoyed a 68-percent gain in second-quarter profits and cited robust marine sales and cost-management strategies. The marine industry giant upped its full-year estimates to a range between $2.60 and $2.68. Brunswick started the year with an estimate of $2.10 to $2.30, and had increased its 2004 guidance in April to a range between $2.45 and $2.65. Investment firm FTN Midwest upgraded its rating on Brunswick to “buy” from “neutral.” Brunswick added 4.96 points, or 12.16 percent, and closed the quarter at 45.76.
West Marine cut its earnings forecast for the third quarter, to between $0.33 and $0.35 per share on sales in a range of $184 million to $185 million. The boating supplies retailer cut its estimate in August to $0.43 and $0.44 per share because of weaker sales in June. The company said hurricanes forced it to close several stores temporarily, and it is still assessing damage. West Marine said it will re-open fewer stores in the third quarter because of clean-up efforts. The retailer lost 5.47 points, or 20.37 percent, and ended at 21.38. — Margot Crabtree

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