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How Brunswick’s Top Line Managed to Rise in 2Q16

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Price movement

Brunswick (BC) has a market cap of $4.5 billion. It fell by 2.0% to close at $49.30 per share on July 28, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.49%, 13.8%, and -1.7%, respectively, on the same day.

BC is trading 3.0% above its 20-day moving average, 4.7% above its 50-day moving average, and 4.3% above its 200-day moving average.

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Related ETFs and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.28% 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 10.0% on July 28, 2016.

The iShares Dow Jones US 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): $48.8 billion
  • Cummins (CMI): $20.9 billion

Performance of Brunswick in fiscal 2Q16

Brunswick reported fiscal 2Q16 net sales of $1.2 billion, a rise of 9.1% compared to net sales of $1.1 billion in fiscal 2Q15. Sales of the marine engine, boat, and fitness segments rose by 4.4%, 5.4%, and 32.2%, respectively, in fiscal 2Q16 compared to fiscal 2Q15.

The company’s cost of sales as a percentage of net sales fell by 0.05%, and its operating earnings rose by 5.0% in fiscal 2Q16 compared to the prior year period. It reported restructuring and integration charges of $2.6 million in fiscal 2Q16.

Its net income and EPS (earnings per share) fell to $108.1 million and $1.17, respectively, in fiscal 2Q16 compared to $117.8 million and $1.25, respectively, in fiscal 2Q15. It reported adjusted EPS of $1.19 in fiscal 2Q16, a rise of 13.3% compared to fiscal 2Q15.

Brunswick’s cash and cash equivalents fell by 25.0%, and its inventories rose by 3.2% in fiscal 2Q16 compared to fiscal 4Q15. Its current ratio and debt-to-equity ratio fell to 1.9x and 1.3x, respectively, in fiscal 2Q16 compared to 2.0x and 1.5x, respectively, in fiscal 4Q15.

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Quarterly dividend

Brunswick has declared a regular quarterly dividend of $0.15 per share on its common stock. The dividend will be paid on September 15, 2016, to shareholders of record on August 23, 2016.

Projections

The company has made the following projections for fiscal 2016:

  • revenue growth rates in the range of 10% to 11%, which includes 5% from acquisitions announced in 2015 and 2016
  • adjusted EPS in the range of $3.40 to $3.50
  • positive free cash flow of more than $200 million

Brunswick’s new acquisition

Brunswick has entered into an agreement to acquire Indoor Cycling Group, a company that designs indoor cycling equipment. This acquisition will provide more opportunity to grow in the fitness market segment. The terms of this transaction were not disclosed.

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

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