Stock Story -
Boat and marine manufacturing company Brunswick (NYSE:BC) missed analysts' expectations in Q4 FY2023, with revenue down 14% year on year to $1.36 billion. Next quarter's revenue guidance of $1.35 billion also underwhelmed, coming in 17.7% below analysts' estimates. It made a non-GAAP profit of $1.45 per share, down from its profit of $1.99 per share in the same quarter last year.
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Brunswick (BC) Q4 FY2023 Highlights:
- Market Capitalization: $5.55 billion
- Revenue: $1.36 billion vs analyst estimates of $1.44 billion (5.4% miss)
- EPS (non-GAAP): $1.45 vs analyst expectations of $1.65 (11.9% miss)
- Revenue Guidance for Q1 2024 is $1.35 billion at the midpoint, below analyst estimates of $1.64 billion
- EPS (non-GAAP) Guidance for Q1 2024 is $1.35 at the midpoint, below analyst estimates of $2.22
- Management's revenue guidance for the upcoming financial year 2024 is $6.1 billion at the midpoint, missing analyst estimates by 3.8% and implying -4.7% growth (vs -6.1% in FY2023)
- Free Cash Flow of $241.8 million, up 74.6% from the previous quarter
- Gross Margin (GAAP): 26.8%, down from 29.6% in the same quarter last year
Leisure Facilities and ProductsConsumers have lots of choices when it comes to how they spend their free time and extra money, so the companies offering leisure products and experiences must highlight their value proposition. Fitness companies may be riding the wellness trend, for example, while those selling recreational vehicles or toys may have to lean into innovation to stand out. Either way, all leisure companies must compete against the 800-pound gorilla of social media and streaming entertainment, which offer instant gratification and have been taking share of consumers’ free time for over a decade.
Sales GrowthExamining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Brunswick's annualized revenue growth rate of 8% over the last 5 years was weak for a consumer discretionary business. Within consumer discretionary, a long-term historical view may miss a company riding a successful new product or emerging trend. That's why we also follow short-term performance. Brunswick's recent history shows its growth has slowed, as its annualized revenue growth of 4.6% over the last 2 years is below its 5-year trend.
This quarter, Brunswick missed Wall Street's estimates and reported a rather uninspiring 14% year-on-year revenue decline, generating $1.36 billion of revenue. The company is guiding for a 22.6% year-on-year revenue decline next quarter to $1.35 billion, a reversal from the 2.8% year-on-year increase it recorded in the same quarter last year. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months.
Cash Is King Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, Brunswick has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 5.3%, subpar for a consumer discretionary business.
Brunswick's free cash flow came in at $241.8 million (17.8% margin) in Q4, up 30.2% year on year.
Over the next year, analysts predict Brunswick's cash profitability will fall. Their consensus estimates imply a 4.6 percentage point decrease in the company's free cash flow margin.
Key Takeaways from Brunswick's Q4 Results We struggled to find many strong positives in these results. BC missed estimates for this quarter and its full-year revenue and earnings guidance also missed analysts' expectations. Overall, the results could have been better. The company is down 4.7% on the results and currently trades at $76.82 per share.
