Update: Marine Products Earnings

Aug. 5.14 | About: Marine Products (MPX)


The company beat earnings consensus by 14%, but shares are flat since then.

The recent performance reaffirms our belief that the company has little operating leverage and is too heavily tied to boating.

We anticipated a lackluster market reaction and expect the market to punish Marine Products going forward.

Marine Products (NYSE:MPX) managed to beat earnings consensus by posting 2Q EPS of $0.08 (compared to $0.07 consensus). Revenue came in at $48 million and beat expectations of $39.6 million. However, the stock is down 10% over the last month and relatively flat since the earnings announcement. 2014 has gotten off to a rocky start for the company due to the long-winter.

Shares are down over 20% since we covered the company back in December. We still think there's nearly 40% downside to $5 a share (versus its current trading levels of $8 a share). At the time we noted that Marine Products was too reliant on the broader economy and had little operating leverage. It requires new boat sales to drive the bottom line.

We noted back in December,

As well, Marine is heavily tied to boats, while Brunswick (NYSE:BC) offers boats, marine engines, fitness equipment, and bowling and billiards products. Brunswick is more diversified, but trades well below Marine. We think this just further justifies the case that Marine doesn't deserve its outsized multiples.

Marine Products still trades at 25x next year's earnings estimates and a 23.1x EV/EBITDA multiple, compared to Brunswick's 14x and 9.3x multiples, respectively.

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