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Boat and marine manufacturer Brunswick (NYSE:BC) fell short of the market’s revenue expectations in Q3 CY2024, with sales falling 20.1% year on year to $1.27 billion. The company’s full-year revenue guidance of $5.15 billion at the midpoint also came in 2.8% below analysts’ estimates. Its non-GAAP profit of $1.17 per share was also 2.4% below analysts’ consensus estimates.
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Brunswick (BC) Q3 CY2024 Highlights:
- Revenue: $1.27 billion vs analyst estimates of $1.29 billion (1.3% miss)
- Adjusted EPS: $1.17 vs analyst expectations of $1.20 (2.4% miss)
- The company dropped its revenue guidance for the full year to $5.15 billion at the midpoint from $5.3 billion, a 2.8% decrease
- Management lowered its full-year Adjusted EPS guidance to $4.50 at the midpoint, a 14.3% decrease
- Gross Margin (GAAP): 26.2%, down from 27.9% in the same quarter last year
- Operating Margin: 7.7%, down from 12.3% in the same quarter last year
- Free Cash Flow Margin: 3.3%, down from 8.7% in the same quarter last year
- Market Capitalization: $5.1 billion
Leisure Products
Leisure products cover a wide range of goods in the consumer discretionary sector. Maintaining a strong brand is key to success, and those who differentiate themselves will enjoy customer loyalty and pricing power while those who don’t may find themselves in precarious positions due to the non-essential nature of their offerings.Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years. Unfortunately, Brunswick’s 5.6% annualized revenue growth over the last five years was sluggish. This shows it failed to expand in any major way and is a rough starting point for our analysis.Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Brunswick’s history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 9.6% annually.
This quarter, Brunswick missed Wall Street’s estimates and reported a rather uninspiring 20.1% year-on-year revenue decline, generating $1.27 billion of revenue.
Looking ahead, sell-side analysts expect revenue to grow 1.1% over the next 12 months, an acceleration versus the last two years. While this projection shows the market thinks its newer products and services will spur better performance, it is still below average for the sector.
Cash Is King
If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.Brunswick has shown weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.2%, subpar for a consumer discretionary business.
Brunswick’s free cash flow clocked in at $41.7 million in Q3, equivalent to a 3.3% margin. The company’s cash profitability regressed as it was 5.4 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren’t a big deal because investment needs can be seasonal, but we’ll be watching to see if the trend extrapolates into future quarters.