Brunswick Corporation manufactures a diverse range of recreational products, from boats to fitness equipment.

Investment Thesis

Despite its recent surge in stock price, Brunswick Corporation (NYSE: BC) continues to be a safe investment candidate due to its stable growth and diversified operations.


Brunswick Corporation, founded in 1907, is a leading global designer, manufacturer, and marketer of a range of recreational products that includes marine engines, boats, fitness equipment, and active recreation products.

The company’s product offering is extremely diverse. It produces many types of engines and many different boats, ranging from pontoons to yachts. And their fitness line includes products for cardiovascular and strength training.

The company sells its products in the United States, Europe, Canada, the Asia-Pacific, Latin America, Africa, and the Middle East. The business operates out of a number of owned and leased properties, but most of their properties are owned.

Marine Engine Segment

The Marine Engine segment, which produced net sales of $2.44 billion in 2016, is made of the Mercury Marine Group. Mercury Marine sells various kinds of engines under various brand names for both recreational and commercial use. It sells to independent boat builders and various governments. The sales are made through a global network of more than 6,000 dealers. Mercury Marine also supplies engines to Brunswick Boats, the boat-producing segment of Brunswick.

Mercury Marine’s new VesselView software allows customers to monitor the health of their engines and has won innovation awards for boat technology. The company also acquired Payne’s Marine Group, which sells marine equipment in Canada. Brunswick hopes the acquisition will increase Mercury Marine’s geographical reach and add to sales.

Boat Segment

This segment consists of Brunswick Boat Group, which produces and sells a wide variety of boats, including fiberglass pleasure boats, yachts and sport yachts, sport boats, offshore fishing boats, pontoon boats, deck boats, and inflatable boats, among others. The Group had net sales of $1.37 billion in 2017 and the company believes it is a global leader in pleasure motorboats.

The Group procures most of its engines from Mercury Marine and sells its boats to international commercial and government institutions. It sells its boats through a network of roughly 3000 dealers and distribution centers.

In July of 2016, the company acquired Thunder Jet Boats, which produces heavy-gauge aluminum boats. They believe that Thunder Jet will add to their product line.

Fitness Segment

The company’s fitness segment produces cardiovascular and strength training products. Their cardiovascular products include things like treadmills, stair masters, and exercise bikes and their strength products include Life Fitness and Hammer Strength. This segment also includes recreational products like billiards tables and other game room furniture.

This segment had net sales of $980.4 million in 2016 and the company believes it is the world’s largest manufacturer of commercial fitness equipment and a leading manufacturer of consumer equipment. The company makes its sales through a direct sales team and dealers around the world.

In 2016, the company acquired two companies to add to this segment: Cybex and Indoor Cycling Group. Cybex is a leading manufacturer of commercial fitness equipment that the company hopes will increase its domain in the fitness segment. With the Indoor Cycling Group acquisition, the company hopes to strengthen its cycling equipment products.

Financial Services Segment

The company has a joint venture, in which it has a 49% stake, with Wells Fargo. The joint venture provides wholesale inventory floorplan financing to its boat and engine dealers.


Net sales have increased consistently over the past few years, rising from $3.8 billion in 2014 to $4.1 billion the next year and then to $4.5 billion in 2016. Net earnings decreased very slightly from 2014 to 2015, going from $245.7 million to $241.4 million. The decrease was due to an atypically high amount of net earnings from discontinued operations in 2014. Net earnings in 2016, however, increased to $276 million.

BC Net Income (Annual) data by YCharts

The company’s rising sales and earnings are fueled by a number of factors. As it explains in Item 7 of its most recent annual filing, the company’s growth has come organically, through strategic acquisitions (which were discussed earlier), and through product innovation. Acquisitions are a cornerstone of the company’s growth model and have done well to increase its performance over the past few years.

Cash Flow

The company’s cash from operations have also been increasing steadily, as the graph below shows. Cash from continuing operations increased from $247 million in 2014 to $338 million the next year to $426 million in 2016.

BC Cash from Operations (Annual) data by YCharts

Again, the company’s cash flows increased so impressively due to organic growth, acquisitions, and innovations through technology like the VesselView and new products.

Book Value

Unsurprisingly, the company’s book value has also increased over the past few years, as the graph below suggests.

BC Book Value (Annual) data by YCharts

The company’s total assets did decrease from 2015 to 2016, primarily as a result of less cash on hand, but a decrease in total liabilities worked against this decrease, and shareholder’s equity increased from $1.28 billion to $1.44 billion.

The company’s debt decreased from $442 million to $436 million from 2015 to 2016, which is a positive for shareholders. The company’s debt to equity ratio is a low 0.31.


BC data by YCharts

Unfortunately for investors thinking of buying into Brunswick, the company’s stock price has increased dramatically since November, surging roughly 42%. This dramatically decreases the margin of safety investors could hope for when buying into the stock. Although the analysis thus far goes completely in the company’s favor as a company, the price is certainly not as friendly as it was three months ago.

Currently, the company’s P/E ratio is 20.48 and its P/B ratio is 3.82. Both of these figures are not bad for the company’s sector, but it is still unfortunate that the surge in the company’s price occurred.


Brunswick is a fantastic company. It is growing consistently in multiple ways: by acquiring other companies, innovating and improving its line of products, and by organically increasing sales. The company’s diversification also helps its case. As it notes in its latest annual filing, although it has competitors in each of its segments, it is a global leader in all of them and no other individual company competes with Brunswick in all of its markets.

All this is great news for any potential investor. The company’s only blemish – which comes through no fault of its own – is its price, which has surged more than 40% since November. This dramatically decreases an investor’s margin of safety and should be noted as a negative. No matter how great a stock is, its value as a potential investment goes down as its price goes up.

Despite the increase in price, however, Brunswick’s quality as an investment still means it is a good investment candidate. Investors obviously cannot expect returns as high at current prices as they would have before, but the company continues to grow in a stable way and is composed in a way that limits is downside in the future.

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