On July 25, 2024, Brunswick Corp (BC, Financial) released its 8-K filing reporting its second-quarter earnings for 2024. Brunswick, a leading manufacturer in the marine recreation industry, faced a challenging quarter with net sales and earnings falling short of analyst estimates.
Company Overview
Brunswick Corp (BC, Financial) is a prominent player in the marine recreation industry, boasting over 60 brands that deliver products across propulsion, parts, accessories, technology, and boats. The company also owns numerous Freedom Boat Club locations and Boateka, which facilitates transactions in the used boat market. Brunswick is dedicated to building innovative marine and recreational experiences supported by quality and innovation.
Q2 2024 Financial Performance
Brunswick reported consolidated net sales of $1,443.9 million for Q2 2024, a 15.2% decline from $1,702.3 million in Q2 2023. The company's GAAP diluted EPS was $1.55, while the adjusted diluted EPS stood at $1.80, both below the analyst estimate of $1.85. The company attributed the lower sales to continued lower wholesale ordering by dealers and OEMs, coupled with higher discounts in certain business segments.
Segment Performance
The Propulsion segment saw a 21% decrease in sales, primarily due to lower net sales and higher manufacturing costs. However, the Engine Parts and Accessories segment reported a 2% increase in sales, driven by strong performance in the Products business. The Navico Group segment experienced an 8% decline in sales, while the Boat segment saw a 23% decrease in sales due to softer wholesale orders and higher incentives and discounting.
Key Financial Metrics
| Metric | Q2 2024 | Q2 2023 | % Change |
|---|---|---|---|
| Net Sales | $1,443.9 million | $1,702.3 million | (15.2)% |
| Operating Earnings | $158.3 million | $194.4 million | (18.6)% |
| GAAP Diluted EPS | $1.55 | $1.91 | (18.8)% |
| Adjusted Diluted EPS | $1.80 | $2.35 | (23.4)% |
Challenges and Outlook
Brunswick faced several challenges in Q2 2024, including high interest rates that pressured consumer budgets and suppressed discretionary spending. The introduction of new model year products did not catalyze boat purchases as anticipated. The company also experienced slower retail sales, higher levels of discounting, and increased carrying costs, which pressured dealer and channel partner profit margins.
"With high interest rates continuing to pressure consumer budgets and suppress discretionary spending, the introduction of new model year products at the beginning of the important month of June did not catalyze boat purchases as we had anticipated, and our second quarter results were slightly below expectations," said Brunswick Chief Executive Officer, David Foulkes.
Financial Achievements
Despite the challenges, Brunswick's engine parts and accessories business had a strong quarter, with sales and operating earnings up compared to Q2 2023. The company also completed the full transition of engine parts and accessories distribution to its new facility in Brownsburg, Indiana. Additionally, Freedom Boat Club continued to deliver steady membership sales growth and added two flagship locations in Denmark and the U.K.
Cash Flow and Balance Sheet
Brunswick reported cash and marketable securities totaling $593.2 million at the end of Q2 2024, up $113.5 million from 2023 year-end levels. Net cash provided by operating activities during the first six months of the year was $67.6 million. Investing and financing activities resulted in net cash used of $18.8 million during the first half of 2024.
Updated Guidance
Given the challenging market conditions, Brunswick has lowered its full-year guidance. The company now expects net sales between $5.2 to $5.4 billion and adjusted diluted EPS in the range of $5.00 to $5.50, down from the previous estimate of $5.50 to $6.00. The company also anticipates free cash flow in excess of $350 million and annual share repurchases of approximately $200 to $220 million.
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Explore the complete 8-K earnings release (here) from Brunswick Corp for further details.
