The Zacks Leisure and Recreation Products industry is likely to benefit from the robust demand for recreational products and golf business. The companies, which design, market, retail, and distribute products for the outdoor and recreation market are witnessing robust demand. Moreover, golf manufactures and boating suppliers are gaining from the ongoing coronavirus pandemic.
Stocks including Acushnet Holdings Corp. (GOLF - Free Report) , Brunswick Corporation (BC - Free Report) , Malibu Boats, Inc. (MBUU - Free Report) , OneWater Marine Inc. (ONEW - Free Report) and Pool Corporation (POOL - Free Report) are likely to gain from the abovementioned industry trends.
The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, including swimming pools, golf courses, boats and outdoor spaces. Some of the industry participants also manufacture outdoor equipment and apparels for climbing, mountaineering, backpacking and skiing.
The industry players primarily thrive on overall economic growth, which fuels consumer demand for products. In fact, demand is highly dependent on business cycles and is driven by a healthy labor market, rising wages and growing disposable income.
3 Trends Shaping the Future of Leisure and Recreation Products Industry
Boating Suppliers Witnessing Robust Demand: New boat sales have increased sharply amid the coronavirus pandemic. Boat sales have been going through the roof since April-end and some dealers are hard pressed to supply. Matt Gruhn, president of the Marine Retailers Association of America (MRAA), is of the opinion that people have had time to research boats while they’ve been cooped up at home. Per National Marine Manufacturers Association (NMMA) reports, new boat sales increased 59% compared to April, up 9% from pre-pandemic levels on a seasonally-adjusted basis. Moreover, in June new boat sales rose 5% compared with the same period previous year. The momentum is likely to continue into 2020 with the NMMA predicting 2% growth for the year. This is healthy considering the fact that boat sales reached an 11-year high in 2019 with personal watercraft, sport boats and cruisers sales up 6%, 6% and 3%, respectively. However, high-volume freshwater fishing boats sales were down 7%.
Booming Golf Business: The golf industry has been doing exceptionally well during the pandemic. Golf is benefiting from increase in participation of young people who refrained from sports like football in adherence to social distancing protocols. Per National Golf Foundation, national rounds played increased 13.9% in June, which highlights that fact that 8 million more rounds were played in June compared with previous year. According to the NPD Group, golf equipment sales increased by 51% in June.
Liquidity a Major Factor During Pandemic: Maintaining liquidity has become a herculean task for a number of industry participants in the current scenario. Most of the companies are cutting pay and furloughing employees. The industry participants are also suspending share repurchase programs and dividend payouts in an effort to improve liquidity. Moreover, supply chain disruptions due the pandemic are likely to hurt the industry in the near term.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects.
The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #8, which places it in the top 8% of more than 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since Apr 30, 2020, the industry’s earnings estimate for the current year has increased 86.6%.
Before we present a few stocks from the industry that you may want to consider, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Outperforms on Shareholder Returns
The Zacks Leisure and Recreation Products industry has outperformed the Zacks S&P 500 composite and its sector over the past year. Stocks in this industry have collectively gained 73.5% over the past year compared with the S&P 500 rally of 12%. Notably, the Zacks Consumer Discretionary sector has increased 2.3% in the same time frame.
One Year Price Performance
On the basis of forward 12-month price-to-earnings, which is a commonly used multiple for valuing leisure products stocks, the industry trades at 37.29X compared with the S&P 500’s 22.14X and the sector’s 26.21X. Over the past five years, the industry has traded as high as 46.38X, and as low as 12.9X, with the median being at 15.5X, as the charts show.
Forward Price To Earnings Ratio Compared With S&P
5 Leisure and Recreation Products Stocks to Keep a Close Eye On
Acushnet Holdings: This Fairhaven, MA-based company designs, develops, manufactures, and distributes golf products in the United States, Europe, the Middle East, Africa, Japan, Korea, and internationally. The Zacks Rank #1 (Strong Buy) is likely to benefit from increase in demand for golf balls. The company is gaining from healthy order backlog, strong at-once demand, lean channel inventories and gradually increasing output levels. The Zacks Consensus Estimate for current quarter has been revised upward by 7.7% in the past 60 days. The stock has gained 21.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: GOLF
Brunswick Corporation: This Mettawa, IL-based company designs, manufactures, and markets recreation products worldwide. This Zacks Rank #1 company is likely to benefit from robust demand in the U.S. retail marine market, which continued into May and June resulting in strong new boat and engine sales. The Zacks Consensus Estimate for current quarter earnings has been revised upward by 40.2% in the past 60 days. The stock has appreciated 17% in the past year.
Price and Consensus: BC
Malibu Boats: This Loudon, TN-based company operates as a designer, manufacturer and marketer of sport boats primarily in the United States. Strength at retail, robust cash flow generation and strong future demand is likely to benefit the company in fiscal 2021. The company’s strategic initiatives, operating plan, and robust product portfolio also bode well. The Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward by 19% in the past 30 days. The stock has gained 61% in the past year. It sports a Zacks Rank #1.
Price and Consensus: MBUU
OneWater Marine: This Buford, GA-based company is a recreational boat retailer in the United States. Other than the sale of new and pre-owned recreational boats and yachts, it sells related parts and accessories, arranges boat financing and insurance; provides boat repair and maintenance services, and other ancillary services such as indoor and outdoor storage. It also rents boats and personal watercraft. This Zacks Rank #1 company is benefiting from robust manufacturing partnerships, well-organized sales process and innovative retail technologies. The Zacks Consensus Estimate for current quarter earnings has been revised upward by 138.5% in the past 60 days. The stock has soared 263.3% in the past six months.
Price and Consensus: ONEW
Pool Corporation: This Covington, LA-based company is the world's largest wholesale distributor of swimming pool supplies, equipment and related products. In addition, it is a leading regional wholesale distributor of irrigation and landscape products. This Zacks Rank #2 (Buy) company's large market presence and strategic expansions through acquisitions are the key revenue drivers. It has also been gaining from robust base business. The Zacks Consensus Estimate for 2020 earnings has been revised upward by 22.3% in the past 60 days. The stock has gained 65.5% in the past year.
Price and Consensus: POOL