On Monday, Roth/MKM adjusted its outlook on Brunswick Corp (NYSE:BC), reducing the price target to $91 from the previous target of $94, while keeping a Buy rating on the shares. The firm revised its full-year 2024 earnings per share (EPS) estimate downward to $5.22 from $7.20, citing a projected 17% decline in consolidated sales, which is a steeper drop than the previously anticipated 5% decrease.
The revised forecast also includes a contraction of operating margins by 290 basis points to 10.7%, which is within the company's guided range of 10-11%. This change reflects expectations of weaker demand in the second half of the year for Brunswick's Boats and Navico and Propulsion products.
However, this is somewhat counterbalanced by a resurgence in the higher-margin Engine Parts & Accessories (P&A) segment, buoyed by robust boating participation as evidenced by a 7% increase in parts demand in Q2.
The firm's new third-quarter EPS estimate for Brunswick now stands at $1.20, aligning with the midpoint of the company's guidance. This figure has been adjusted down from the previous estimate of $2.20. The revision comes as the analyst anticipates challenges in the latter half of the year, which are expected to impact the company's performance.
Despite the lowered estimates and price target, the firm's continued Buy rating suggests a belief in the long-term value of Brunswick's stock. The adjustments reflect a response to both company-specific forecasts and broader market conditions that are influencing demand for Brunswick's products.
Investors are being provided with the latest expectations for Brunswick's financial performance as the market heads into the latter part of the year. The company's stock will continue to be observed as it navigates the forecasted decline in demand and strives to maintain profitability through its high-margin segments.
In other recent news, Brunswick Corporation's second-quarter performance fell short of expectations, leading to a downward revision in their full-year unit retail sales forecasts. The company's net sales are now anticipated to be between $5.2 billion and $5.4 billion, with adjusted diluted EPS ranging from $5 to $5.50.
Despite the slower sales, Brunswick's recurring revenue businesses, such as Engine P&A and Freedom Boat Club, generated more than half of Q2's adjusted operating earnings.
In response to the weak Q2 results, Jefferies downgraded Brunswick's stock rating from Buy to Hold and reduced the price target to $70. The firm cited concerns about the slower recovery for the boat cycle and delays in orders from dealers and original equipment manufacturers. Baird also adjusted its price target for Brunswick to $93 while maintaining an Outperform rating on the stock, due to the company's strong brand presence and substantial assets.
Brunswick's strong cash flow allowed for $170 million in share repurchases year-to-date. Moreover, the company remains confident in its cost reduction program, targeting a $70-80 million reduction in operating expenses by year-end.
These are some of the recent developments impacting Brunswick's financial performance and outlook.
InvestingPro Insights
As investors digest Roth/MKM's revised outlook for Brunswick Corp (NYSE:BC), it is worth considering additional insights provided by InvestingPro. The company's management has shown confidence in its stock by aggressively buying back shares, which can often be seen as a positive signal regarding future performance. Additionally, Brunswick has a notable history of rewarding shareholders, having raised its dividend for 11 consecutive years, a testament to its financial resilience and commitment to returning value to investors.
From a financial perspective, Brunswick's market capitalization stands at $5.4 billion with a current P/E ratio of 5, indicating that the stock may be undervalued relative to earnings. Despite analysts anticipating a sales decline in the current year, the company has remained profitable over the last twelve months and maintains a solid dividend yield of 2.1%. However, it's crucial to note that 10 analysts have revised their earnings downwards for the upcoming period, which could be a point of concern for potential investors.
For those seeking further analysis and additional InvestingPro Tips, there are 5 more tips available, which can be accessed by visiting https://www.investing.com/pro/BC. To enhance your investment research experience, use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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