Road trips are not the only way people are enjoying this summer. There are other ways too of getting out of the house and enjoying the good weather.
As it turns out, recreational boats provide much the same advantages as RVs in this environment, because when you’re at sea (or lake), you’re pretty much in your own little island, family and all. And if you’re not into sailing, there are other things to do as well, such as water sports, rowing (preferred by some as a fitness activity) or fishing. This is pretty attractive when you consider that movie halls, gatherings and many other entertainment options are also off limits at the moment.
That’s probably why boat sales have been going through the roof since April-end and some dealers are hard-pressed to supply. As Matt Gruhn, president of the Marine Retailers Association of America (MRAA) says, people have had time to research boats while they’ve been cooped up at home. There appears to be adequate inventory to convert this strong interest into sales, and the product mix is understandably shifting in favor of new entry level boats.
Also note that this was a strong market going into 2020, with the National Marine Manufacturers Association (NMMA) predicting 2% growth for the year. This is healthy considering the fact that boat sales reached an 11-year high in 2019 with personal watercraft sales up 6%, sport boats up 6%, cruisers up 3% and high-volume freshwater fishing boats down 7%. This was in addition to the 975,000 pre-owned boats sold (estimates as of Jan 2020, as quoted in businesswire).
Boating suppliers are categorized under the Leisure and Recreation Products industry by Zacks. These stocks have returned 41.4% year to date, so some may be cautious on valuation considerations. But note that we are seeing a special year in terms of demand, so it isn’t much of a stretch to imagine that upward revision to estimates will generate further upside in share prices.
Here are a few boating stocks I like, plus a couple other stocks in this group-
Brunswick (NYSE:BC) Corporation BC
Brunswick Corporation designs, manufactures and sells marine engine products, electronics and control integration systems, steering systems, instruments, controls, propellers, trolling motors, fuel systems, electrical systems, service parts, lubricants and integrated propulsion systems, as well as parts and accessories to recreational, commercial and government customers through dealers and distributors.
It also sells recreational boats like fiberglass pleasure, sport cruisers, sport fishing and centre-console, offshore fishing, aluminium and fiberglass fishing, pontoon, utility, deck, inflatable, and heavy-gauge aluminium under the Bayliner, Heyday, Boston Whaler, Lund, Crestliner, Cypress Cay, Harris, Lowe, Princecraft, and Thunder Jet brands.
Zacks Rank #1
EPS expected to decline 31.4% in 2020 (ending December) then jump 42.2% in 2021.
2020 EPS dropped from $3.69 to $2.81 before growing to $2.97 in the last 90 days
2021 EPS dropped from $4.29 to $3.83 before growing back to $4.23 in the last 90 days
There are no downward revisions to these estimates in the last 60 days
Strong surprise history averaging +8.4% in the preceding four quarters
Valuation: The current price to forward 12 months earnings of 17.85X is between the median value of 11.32X and recently-attained annual high of 19.90X. For comparison, the S&P 500 is trading at its annual high.
Malibu Boats (NASDAQ:MBUU), Inc. MBUU
Malibu Boats, operates as a designer, manufacturer and marketer of sport boats primarily in the U.S. The company sells its boats under the Malibu and Axis Wake Research brands. Its sport boats are used for water skiing, wakeboarding and wake surfing, as well as for general recreational boating use.
Zacks Rank #1
EPS expected to decline 20.5% in 2020 (ending December) and grow 15.9% in 2021.
2020 EPS dropped from $3.40 to $2.96 before growing to $2.99 in the last 90 days
2021 EPS dropped from $3.41 to $3.33 before growing to $3.46 in the last 90 days
There were no downward revisions to these estimates in the last 60 days
Strong surprise history averaging +19.1% in the preceding four quarters
Valuation: The current price to forward 12 months earnings of 14.92X is between the median value of 9.55X and recently-attained annual high of 17.88X
OneWater Marine (NASDAQ:ONEW) Inc. ONEW
OneWater Marine, which floated its IPO this February, is a recreational boat retailer in the U.S. Other than the sale of new and pre-owned recreational boats and yachts, it sells related parts and accessories, arranges boat financing and insurance; provides boat repair and maintenance services, as well as other ancillary services such as indoor and outdoor storage. It also rents boats and personal watercraft.
Zacks Rank #1
EPS expected to grow 35.6% in 2021 (ending September).
2021 EPS grew from $0.75 to $1.81 in the last 90 days, there were no downward revisions in the last 60 days.
Since it only became a public company recently, modeling estimates could be tricky. The company missed estimates in the last quarter.
Valuation: On the basis of price to forward 12 months’ earnings, the shares are trading at 13.08X, which is below the median value of $13.51X over the few months since the IPO
YETI Holdings, Inc. YETI
Yeti Holdings (NYSE:YETI) designs, markets and distributes YETI branded products for the outdoor and recreation market, primarily in the U.S. The company's products are designed for use in recreational or professional outdoor activities like hunting, fishing, camping, barbecue, farm and ranch activities. They include things like soft coolers and storage; drinkware products like colsters, lowballs, stackable pints, mugs, tumblers, bottles and jugs; accessories like bottle straw caps, tumbler handles and jug mounts; and other gear like hats, shirts, bottle openers, ice substitutes and dog bowls.
Zacks Rank #1
EPS expected to decline 15.0% in 2020 (ending December) and grow 28.2% in 2021.
2020 EPS dropped from $1.18 to $0.98 before growing to $1.02 in the last 90 days
2021 EPS dropped from $1.41 to $1.25 before growing to $1.31 in the last 90 days
There were no downward revisions to these estimates in the last 60 days
Strong surprise history averaging +18.6% in the preceding four quarters
Valuation: The current price to forward 12 months earnings ratio of 35.87X is between the median value of 26.48X and recently-attained annual high point of 40.43X.
Vista Outdoor (NYSE:VSTO) Inc. VSTO
Vista Outdoor develops, manufactures and distributes optics, accessories and eyewear. The company operates in two segments: Shooting Sports and Outdoor Products. Its product line includes binoculars, laser rangefinders, riflescopes, trail cameras, archery accessories, blinds, decoys, game calls, gun care products, mounts, powder, reloading equipment, targets, target systems, safety and protective eyewear, fashion and sports eyewear under the Bushnell, Primos, Bollè, Serengeti, Cèbè, RCBS, Hoppe's, Uncle Mike's, Gold Tip, Weaver and Tasco brands.
Zacks Rank #2
EPS expected to grow 62.5% in 2021 (ending March) and grow 27.4% in 2022.
2021 EPS dropped from $0.40 to $0.37 before growing to $0.39 in the last 90 days
2022 EPS dropped from $0.48 to $0.40 before growing to $0.50 in the last 90 days
There were no downward revisions to these estimates in the last 60 days
Strong surprise history averaging +72.9% in the preceding four quarters
Valuation: The current price to forward 12 months earnings ratio of 36.63X is between the median value of 24.89X and annual high point of 45.97X
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Brunswick Corporation (BC): Free Stock Analysis Report
Malibu Boats, Inc. (MBUU): Free Stock Analysis Report
Vista Outdoor Inc. (VSTO): Free Stock Analysis Report
YETI Holdings, Inc. (YETI): Free Stock Analysis Report
OneWater Marine Inc. (ONEW): Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research