Brunswick Corp. (BC): Zacks Rank Buy

Zacks

Brunswick Corporation (BC) reported a huge earnings surprise of nearly 130% in its third quarter, which has sent shares higher. In fact, this market leader in recreation and lifestyle brands has now surpassed the Zacks Consensus Estimate for seven straight quarters with an average surprise of 133.6%.

This Zacks #1 (Strong Buy) Rank stock has bright prospects ahead with significant growth in brands and sales expected. The company continues to focus on cost reductions and operating efficiencies throughout the organization.

Solid Third Quarter Beat

On October 25, Brunswick reported adjusted earnings of 43 cents per share for the third quarter, which beat the Zacks Consensus Estimate by 126.32% while also improving 30.3% year over year.

Net sales of $884.8 million increased 1.0% from the prior-year quarter. In particular, the Engine segment experienced strong revenue growth.

Gross margins expanded 310 basis points over the prior-year quarter to 55.9%, while operating profit increased 35% to $65.7 million. Gross margins were driven by top-line growth and lower cost of goods sold.

For full year 2012, the company tightened its earnings guidance to between $1.65 and $1.75 per share from the previous range of $1.60 to $1.75.

Earnings Estimates Climbing Sharply

The Zacks Consensus Estimate for fiscal 2012 has moved higher by 8.8% to $1.73 per share over the last 30 days, representing a year-over-year increase of 48.2%. For fiscal 2013, the Zacks Consensus Estimate has climbed 12.3% to $2.19 over the same time frame, suggesting a year-over-year improvement of 26.5%.

Attractive Valuation

Brunswick currently trades at a forward P/E multiple of 14.5x, reflecting a 7.6% discount to the peer group average of 15.7x. In addition, it has a trailing 12-month return on equity (:ROE) of 123.1%, which is above its peer group average of 25.9%.

Chart Showing Consistent Advance

Shares of Brunswick have been rising consistently since the end of October, following the announcement of its solid third quarter results. Moreover, the stock is currently trading above its 50- and 200-day moving averages, which stand at $23.66 and $23.29, respectively.

Volume is strong, averaging roughly 1,003K daily. The year-to-date return for the stock is 39.25% compared with the S&P 500 return of 10.89%.

Based in Lake Forest, Illinois, Brunswick Corp is best known for making bowling and billiard equipment. However, it has evolved into a much more diverse company with high power brands across several industries; from Life Fitness and Hammer-strength in its fitness division to some of the top names in marine boating like Bayliner, SeaRay, Cabo Yackts and more. Brunswick also manufactures marine engines and accessories under Mercury, Mariner, and other brands. The market cap of the company is $2.30 billion.


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