For many an investor who’s watching certain trendy stocks stagnate, the following may be a hard bowling ball to swallow. Twitter (ticker: TWTR) has been listless for three years; Tesla ( TSLA) has stalled over…
For many an investor who’s watching certain trendy stocks stagnate, the following may be a hard bowling ball to swallow.
Twitter (ticker: TWTR) has been listless for three years; Tesla ( TSLA) has stalled over the past 12 months, off 12 percent; and Starbucks Corp. ( SBUX) — a seemingly impermeable java monolith — just passed the three-year mark flatter than a mocha gone room temperature.
And then there’s Brunswick Corp. ( BC), the onetime king of the alley: a name that still conjures images of patented pinsetters and vulcanized rubber bowling balls worthy of “The Big Lebowski.” How geeky is that? Well, try this: BC is up 27 percent over the last 12 months, 40 percent over the last three years and more than two-thirds over the last five. It’s currently trading at close to $68 per share and assuming the mythical Jeff “The Dude” Lebowski pawned his legendary rug to buy some shares and rack up some dividends, he made enough to buy it back and then some.
Then again, the astute Brunswick investor knows that the company’s image belies this truth: It got out of the bowling retail business in 2014, even if its “Brunswick Zone” lane brand still exists. (Former competitor Bowlero Corp., a privately held company, now owns and operates the lanes.)
Instead, the Chicago-area company doubled down in areas such as boating and fitness equipment (the latter not necessarily associated with many a bowler). And indeed, more sea changes — literally — are in the air.
“Though the Brunswick brand may still be best known for bowling and billiards, the most significant brands for the company have been Mercury boat engines, Sea Ray and Boston Whaler boats, and Life Fitness equipment,” says James Hardiman, managing director of equity research at Wedbush Securities, headquartered in Los Angeles. “And once they spin off Life Fitness next year, Brunswick will basically be a marine business, selling boats, boat engines, and marine parts and accessories.”
There’s every reason to believe that this move will float the boat of already happy Brunswick investors, given what the company will likely do with the cash infusion.
“It has gained share and expanded their offering in marine parts and accessories as a result of a series of acquisitions in this business, most notably the recent acquisition of Power Products for $910 million,” Hardiman says.
Among analyst firms, the overwhelming verdict on Brunswick is that it’s a “strong buy” — an opinion held by 11 of 14 firms. Not a single one falls on the down side; just two rate it a “hold” and one a “buy.”
As for its dividend, it’s gotten much better though still not spectacular.
“After holding the dividend constant for several years, the firm doubled it in 2013 and has increased the dividend every year since,” says Robert Johnson, a finance professor at Creighton University. “Still, the dividend yield is fairly modest as it only has a 1.14 percent forward yield.”
That adds up to a payout ratio of just about 20 percent over the past three years. Once just a measly 5 cents in 2012, it now pays out at a quarterly rate of 19 cents per share. Could that bode well looking ahead? Hardiman thinks so: “Management is committed to not only paying a dividend but also increasing it for the foreseeable future,” he says.
Meanwhile, there’s one quirk to Brunswick’s trading cycle that shareholders present and future will want to note: the stock seems to get a lift depending on the season.
“Brunswick has historically had a fairly distinct seasonal trading pattern, and tends to outperform during September to March and underperform from April to August,” Hardiman says.
This seemingly correlates with the movement of boating product sales, which are also cyclical.
In an April earnings call, Brunswick chairman and CEO Mark D. Schwabero noted that “at this point in the marine season, our current outlook for the global marine market remains in line with our initial expectations — while unfavorable weather conditions in certain markets, including the Northeast and Midwest regions of the U.S. and Europe, have contributed to a slightly lower start to boating activity and the marine retail selling season.”
As for the company’s future prospects, expect Brunswick to venture even further away from its bowling past and beyond its current moorings. Johnson says a recent Barron’s report suggested that BC was “eyeing growth opportunities such as wellness equipment for elderly centers and standing desks for workplaces.”
Who could’ve imagined such a forward trajectory in the 1850s? Certainly not President Abraham Lincoln, who purchased one of the company’s early billiard tables. Then again, the last thing that Brunswick wants as a company is to fall behind the times — let alone put customers behind the eight ball.