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Why Did Brunswick Corporation Acquire Thunder Jet?

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Brunswick’s price movement

Brunswick Corporation (BC) has a market cap of $4.1 billion. Its stock fell by 3.4% to close at $44.95 per share on July 5, 2016. The stock’s weekly, monthly, and YTD (year-to-date) price movements were 7.5%, -3.9%, and -10.4%, respectively, on the same day. BC is trading 3.1% below its 20-day moving average, 4.7% below its 50-day moving average, and 4.9% below its 200-day moving average.

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Related ETFs and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.60% of its holdings in Brunswick. The ETF tracks a market cap–weighted index of growth companies culled from the S&P 400. The YTD price movement of IVOG was 4.9% on July 5.

The iShares Dow Jones U.S. ETF (IYY) invests 0.02% of its holdings in Brunswick. The ETF tracks a broad, cap-weighted index of US companies covering 95% of the US market.

The market caps of Brunswick’s competitors are as follows:

  • Caterpillar (CAT): $43.1 billion
  • Cummins (CMI): $18.9 billion

Brunswick’s new acquisition

Brunswick Corporation has acquired Thunder Jet, a designer and builder of heavy-gauge aluminum boats. The terms of this acquisition are not disclosed.

The company also noted, “With a current portfolio of 18 models ranging in length from 18-26 feet, Thunder Jet will operate as a key part of the Freshwater Boat division of the Brunswick Boat Group (BBG), adding breadth and depth to BBG’s overall product portfolio.”

This acquisition will provide a market share in the niche market where boat and marine engine brands are currently underrepresented and will increase Brunswick’s top line in the Boat and Marine Engine segments.

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Brunswick’s performance in fiscal 1Q16

Brunswick (BC) reported fiscal 1Q16 net sales of $1.1 billion, a rise of 8.6% over the net sales of $985.7 million in fiscal 1Q15. Sales of its Marine Engine, Boat, and Fitness segments rose by 5.9%, 5.9%, and 17.6%, respectively, in fiscal 1Q16 as compared to fiscal 1Q15.

In fiscal 1Q16, the company’s net income and EPS (earnings per share) rose to $64.8 million and $0.70, respectively, compared with $57.0 million and $0.60, respectively, in fiscal 1Q15.

Brunswick’s cash and cash equivalents fell by 57.1%, and its inventories rose by 7.6% in fiscal 1Q16, as compared to fiscal 4Q15. In fiscal 1Q16, its current and debt-to-equity ratios fell to 1.8x and 1.4x, respectively, as compared with 2.0x and 1.5x in fiscal 4Q15.

Projections

Brunswick (BC) made the following projections for fiscal 2016:

  • revenue growth of 9%–11%, which includes the acquisition of Cybex
  • adjusted EPS in the range of $3.40–$3.50, as compared to the previous guidance of $3.35–$3.50
  • positive free cash flow of more than ~$200 million

For an ongoing analysis of this sector, please visit Market Realist’s Consumer Discretionary page.

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