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Why CL King Rated Brunswick Corporation a ‘Buy’

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Price movement

Brunswick Corporation (BC) has a market cap of $4.9 billion. It fell 1.1% to close at $54.57 per share on December 22, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 0.96%, 14.4%, and 9.5%, respectively. BC is trading 3.2% above its 20-day moving average, 11.7% above its 50-day moving average, and 14.7% above its 200-day moving average.

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Related ETF and peers

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.28% of its holdings in Brunswick. The YTD price movement for IVOG was 13.7% on December 22.

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

  • Caterpillar (CAT): $56.2 billion
  • Cummins (CMI): $23.9 billion

BC’s rating

On December 22, 2016, CL King initiated coverage of Brunswick Corporation with a “buy” rating and also set the stock’s price target at $65.0 per share.

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Brunswick’s performance in fiscal 3Q16

Brunswick reported fiscal 3Q16 net sales of $1.1 billion—a rise of 10.2% over its net sales of $991.9 million in fiscal 3Q15. Sales from the Marine Engine, Boat, and Fitness segments rose 6.4%, 13.2%, and 20.3%, respectively, between fiscal 3Q15 and fiscal 3Q16. The company’s operating margin narrowed by 50 basis points, and it reported restructuring and integration charges of $2.4 million in fiscal 3Q16.

Its net income and EPS (earnings per share) rose to $85.4 million and $0.93, respectively, in fiscal 3Q16, compared to $75.9 million and $0.81, respectively, in fiscal 3Q15. It reported adjusted EPS of $0.91 in fiscal 3Q16, a YoY (year-over-year) rise of 18.2%.

Brunswick’s cash and cash equivalents fell 33.5%, and its inventories rose 10.2% between fiscal 4Q15 and fiscal 3Q16.

Projections

The company has made the following projections for fiscal 2016:

  • revenue growth rate of ~10%
  • adjusted EPS in the range of $3.45–$3.50
  • positive free cash flow of more than ~$215 million

Next, we’ll look at Drew Industries (DW).

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