Brunswick Hits The Wake, Has 23% Upside According To Imperial Capital

Imperial Capital’s George Kelly noted that PA and the Fitness businesses were driving stable, high margin growth for Brunswick Corporation (NYSE: BC), in a “benign” boating environment.

Kelly initiated coverage of the company with an Outperform rating and price target of $60.

The analyst believes the stock could have 23 percent upside potential.

Compelling Stock

Kelly mentioned that Brunswick Corp “presents a compelling opportunity due to its improved operating model and financial profile, attractive valuation and option value should new boat sales accelerate.”

Related Link: Redfin Names The 10 Best Cities For Boaters

Given the outperformance of the stock during Q4 and Q1, the analyst believes the time is right to acquire Brunswick shares.

Recovery Underway

Kelly also pointed out that the recovery in the boating segment was only in its mid-stages, with macro-economic and marine data seeming “relatively benign” and supporting continued growth.

However, the analyst also noted that new boat sales “remain well below pre-recession levels despite growth in boating participation and stable boat registrations.”

On the other hand, the company’s improved operating model and financial profile were expected to drive more consistent growth, given that the recent financial and operating changes lay greater emphasis on less-cyclical, growing segment, while de-risking the balance sheet.

Kelly expects Brunswick Corp to see meaningful upside if boating “picks up steam,” saying that even in a stable end market, “we see potential for margin improvement.”

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