Rough Waters Ahead For Boat Maker Brunswick - Barron's

Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

MarineMax by Kopin Tan

Summary: One frontier suffering reverberations of the housing market slump is offshore: the boating industry. Last Thursday, boat retailer MarineMax (HZO) reported a 20% drop in first quarter sales and issued yet another warning about 2007 profits, indicating that the worst isn't over for the sailing sector. Declining real estate prices, which reduce the cash people have available to buy boats, have been blamed. Shares of leisure-boat maker Brunswick (BC) dropped 4% on the news. Rochdale Securities' analyst Hayley Wolff says the company may not be able to cut production fast enough to avoid excess inventory, and resultant price discounting may lead to further pressures on Brunswick's margins. She also notes that small-boat buyers are likely to be among the hardest hit by post-adjusted interest rates and rising fuel costs. Barron's says analysts' hopes that earnings, currently at $1.80/share, have bottomed and will soon return to $2.15, are unrealistic. Until housing begins to show signs of strengthening, boat makers and sellers may stay seasick for the duration.

Related Links: Sector Snap: Boat makers and suppliers [Business Week]• Talk of the bay: Forecast runs MarineMax's stock aground [St. Petersberg Times] • Brunswick: Bargain Basement Boating? (BC)

BC vs. HZO 1-yr chart