NEW YORK – Shares of Brunswick Corp. dropped yesterday after several analysts downgraded the boat and engine manufacturer’s stock in response to reports that Brunswick temporarily cut production of aluminum boats in a bid to lower inventory levels.
Banc of America Securities reduced its FY05 EPS estimate by $0.07, to $3.28, saying it had less confidence in Brunswick’s ability to deliver the same type of upside than it had in the past.
“We have also reduced our FY06 EPS estimate by $0.10 to $4.00 and our price target by $1 to $49,” BofA said in a release. “Despite Brunswick’s more attractive valuation, we are retaining our Neutral bias due several near-term questions. In our opinion, questions remain about 1) potential defections of Sea Pro dealers, 2) 2005 marine demand, and 3) the status of industry backlash against Brunswick. The Miami Boat Show (February 17-21) should be a good forum to provide some color on these questions.”
Banc of America said it expects revenue growth to decelerate and margins to contract for leisure companies in 2005 due to industry maturing trends and rising commodity and transportation costs.
RBC Capital cut Brunswick’s stock to “Sector perform” from an “Outperform,” the Associated Press reported in a story Monday.
“Our concern is simply that there are more headwinds than positive catalysts in the near term,” RBC Capital analyst Edward Aaron said in a note to clients, AP reported.
The analyst cut the stock price target to $50 from $60, and his 2005 earnings per share expectation to $3.28 from $3.30.
As reported by Boating Industry in a story Brunswick stopped production for nearly two weeks at it’s Lund and Crestliner production facilities to reduce inventory caused by lackluster retail sales last year and a slow start to the 2005 boat show season.
“This production cut does not necessarily warrant a downgrade, as we believe the challenges in this division are not fully representative of overall company trends,” Aaron said. “However, in the context of other data points — including a lack of recent earnings upside, lower-than-expected 2005 guidance, and the loss of its dumping suit — we see enough reasons for pause in the near term.”
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