Leisure and Recreation Products industry continues to benefit from strong demand for recreational products and golf business. The industry participants, 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. Further, rise in fitness products sales due to increase in awareness about health and fitness among people is favoring the industry. Stocks including Pool Corporation ( POOL Quick Quote POOL - Free Report) , Academy Sports and Outdoors, Inc. ( ASO Quick Quote ASO - Free Report) , Callaway Golf Company ( ELY Quick Quote ELY - Free Report) , OneWater Marine Inc. ( ONEW Quick Quote ONEW - Free Report) and Vista Outdoor Inc. ( VSTO Quick Quote VSTO - Free Report) are likely to gain from the abovementioned industry trends. Industry Description
The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, including swimming pools, marine products, golf courses, boat repair and maintenance services and other ancillary services, encompassing indoor and outdoor storage, and marine products, as well as rental of boats and personal watercraft. Some of the industry participants also manufacture outdoor equipment and apparel for climbing, mountaineering, backpacking and skiing. Several companies also provide connected fitness products and subscription for multiple household users. The industry players primarily thrive on overall economic growth, which fuels consumer demand for products. In fact, demand, which is highly dependent on business cycles, is driven by a healthy labor market, rising wages and growing disposable income.
4 Trends Shaping the Future of Leisure and Recreation Products Industry
New boat sales have increased sharply amid the coronavirus pandemic. In fact, boat sales have been going through the roof since April-end last year 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, retail unit sales of new powerboats increased by 12% in 2020, compared with the prior year. More than 310,000 new powerboats were sold in 2020. Moreover, boat sales in the United States touched a 13-year high. The momentum continues in 2021. According to Marine Retailers Association of America, 95% of the boats in the world are made in the United States. Moreover, ResearchAndMarkets the boat repairing market is likely to increase from $6.33 billion in 2020 to $6.81 billion in 2021 at a CAGR of 7.6%. The market is expected to reach $8.75 billion in 2025 at a CAGR of 6.5%. Boating Suppliers Witnessing Robust Demand: The golf industry has been doing exceptionally well during the pandemic. Golf is benefiting from increase in participation of young people. Per Golf Datatech and its 2020 National Golf Performance Report, 2020 rounds rose by 13.9%, while equipment sales surged 10.1% in 2020. The 10.1% increase in retail sales broke the previous record gain of 10% in 2005. During the second half of 2020, demand for all gulf things improved. The uptrend continued in January with total rounds surging 21.4% year over year. Booming Golf Business: The industry is likely to benefit from the decline in the unemployment rate. The Conference Board recently reported that its consumer sentiment index stands at 117.2 for May after downward revision in April. This stable consumer confidence is also helping the leisure industry gear up for a post-pandemic resurgence. With restrictions being eased, Americans are venturing out and engaging in outdoor recreation. This, in turn, has been boosting consumer confidence consistently. Recovering Economy: 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. Liquidity a Major Factor Amid Pandemic: 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 #21, which places it in the top 8% of more than 250 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 Dec 31, 2020, the industry’s earnings estimate for the current year has increased 10.3%. 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 61.7% over the past year compared with the S&P 500 rally of 35.2%. Notably, the Zacks Consumer Discretionary sector has increased 23.9% 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 28.81X compared with the S&P 500’s 21.84X and the sector’s 30.08X. Over the past five years, the industry has traded as high as 44.8X and as low as 12.36X, with the median being at 15.3X, as the charts show.
Forward Price To Earnings Ratio Compared With S&P
5 Leisure & Recreation Products Stocks to Keep an Eye on
Pool Corp: Based in Covington, LA, the company is the world's largest wholesale distributor of swimming pool supplies, equipment and related products. This Zacks Rank #1 (Strong Buy) company has been benefiting from solid performance of base business, large market presence and strategic expansions through acquisitions. Also, it is gaining from solid demand across heaters, lighting, pumps, filters and pool remodeling. The company is committed toward returning more value to shareholders. In the past six months, shares of this company have surged 29.6%, compared with the industry’s growth of 9.4%. The Zacks Consensus Estimate for 2021 has been revised upward by 22.8% in the past 60 days. Price & Consensus: POOL Academy Sports and Outdoors: Based in Katy, TX, the company through its subsidiaries, operates as a sporting goods as well as outdoor recreational products retailer in the United States. It is benefiting from robust consumer demand across all markets and merchandise divisions, primarily Sports & Recreation. Moreover, increase in demand for indoor and outdoor games, bikes, fitness equipment and outdoor cooking bode well. In the past six months, shares of this Zacks Rank #1 company have soared 132.6%, compared with the industry’s rally of 9.4%. The Zacks Consensus Estimate for 2021 has been revised upward by 24.5% in the past 30 days. Price & Consensus: ASO Callaway Golf: This Carlsbad, CA-based company designs, manufactures, and sells golf clubs and golf balls, apparel, gear, and other products. This Zacks Rank #2 (Buy) company is benefiting from strong demand for its golf equipment business. Moreover, its TravisMathew and Callaway branded businesses is witnessing robust growth. Demand for soft goods business and Topgolf business are recovering from the pandemic faster than anticipated. The Zacks Consensus Estimate for current quarter earnings has been revised upward to 9 cents, from a loss of 31 cents, in the past 30 days. The stock has appreciated 51% in the past six months. Price & Consensus: ELY 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 31.3% in the past 30 days. The stock has soared 68.7% in the past six months. Price & Consensus: ONEW Vista Outdoor: This Anoka, MN-based company designs, manufactures, and markets several consumer products in the outdoor sports and recreation markets in the United States and internationally. This Zacks Rank #1 company is gaining from solid business model, products offering and expansion of its e-commerce capabilities. The Zacks Consensus Estimate for 2021 earnings has been revised upward by 23.4% in the past 30 days. The stock has gained 115.2% in the past six months. Price & Consensus: VSTO
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