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4 Top Picks From the Booming Leisure & Recreation Products Industry

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The Zacks 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. Golf manufactures and boating suppliers are gaining from the coronavirus pandemic. Rise in fitness products sales due to increasing awareness about health and fitness among people is favoring the industry. With restrictions being eased, Americans are venturing out and engaging in outdoor recreation. This, in turn, has been driving demand consistently. Stocks including Academy Sports and Outdoors, Inc. (ASO - Free Report) , Vista Outdoor Inc. (VSTO - Free Report) , Acushnet Holdings Corp. (GOLF - Free Report) and YETI Holdings, Inc. (YETI - 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, comprising swimming pools, marine products, golf courses, boat repair and maintenance services and other ancillary services, including indoor and outdoor storage, and marine, as well as rental of boats and personal watercraft. Some of the industry participants manufacture outdoor equipment and apparels for climbing, mountaineering, backpacking and skiing. Some companies also provide connected fitness products and subscriptions 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

Boating Suppliers Witnessing Robust Demand: 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. 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, compared with 178,000 and 286,000 boats sold in the United States in 2010 and 2012, respectively. In fact, boat sales in the United States touched a 13-year high. The momentum continues in 2021. According to the Marine Retailers Association of America, 95% of the boats in the world are made in the United States. According to ResearchAndMarkets, the boat repairing market is likely to increase from $6.33 billion in 2020 to $6.81 billion in 2021, witnessing a CAGR of 7.6%. The market is anticipated to reach $8.75 billion in 2025, seeing a CAGR of 6.5%.

Booming Golf Business: The golf industry has been doing exceptionally well amid the pandemic. Golf is benefiting from an 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. Per National Golf Foundation, more than 24.8 million people played golf in the United States in 2020, up 2% year over year — the biggest increase in 17 years. The robust golf demand continues in 2021. Of late, the golf industry has been gaining from strong participation from millennials. Technology has also been playing a vital role in reshaping the asport of golf. Meanwhile, India and China have popped up as two of the largest emerging golf markets.

Economy Recovering: The industry is likely to benefit from the decline in the unemployment rate. Recently, Automatic Data Processing reported private-sector payroll report. The ADP National Employment Report showed private payrolls gained 568,000 jobs last month, which was better than expectations of 425,000 and the prior month’s downwardly revised 340,000.

Liquidity a Major Factor Amid 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.

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 #44, which places it in the top 17% of more than 252 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 Mar 31, 2021, the industry’s earnings estimate for the current year has increased 33.2%.

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 Underperform the S&P 500

The Zacks Leisure and Recreation Products industry has underperformed the Zacks S&P 500 composite and its sector over the past year. Stocks in this industry have collectively declined 38.9% over the past year against the S&P 500’s rally of 29%. The Zacks Consumer Discretionary sector has increased 8.4% in the same time frame.

One Year Price Performance

Valuation

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 15.28X compared with the S&P 500’s 20.84X 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 15.28X, as the charts show.

Forward Price To Earnings Ratio Compared With S&P

4 Leisure & Recreation Products Stocks to Watch

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. Increase in demand for indoor and outdoor games, bikes, fitness equipment and outdoor cooking bodes well.

In the past six months, shares of this Zacks Rank #1 (Strong Buy) company have surged 65.7%, against the industry’s decline of 38.9%. The Zacks Consensus Estimate for 2021 has been revised upward by 20% in the past 30 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Price & Consensus: ASO

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 #2 (Buy) company is gaining from a solid business model, products offering and expansion of its e-commerce capabilities. The Zacks Consensus Estimate for 2021 earnings has been revised upward by 72.5% in the past 90 days. The stock has gained 95% in the past year.

Price & Consensus: VSTO

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 #2 is likely to benefit from an increase in demand for golf balls. It is gaining from a healthy order backlog, strong at-once demand, lean channel inventories and gradually increasing output levels. The company is also benefiting from robust demand for its Pro V1 franchise. The Zacks Consensus Estimate for 2021 has been revised upward by 3.7% in the past 30 days. The stock has appreciated 41% in the past year.

Price & Consensus: GOLF

YETI Holdings: This Austin, TX-based company designs, markets, retails, and distributes products for the outdoor and recreation market under the YETI brand. The Zacks Rank #2 company is persistently investing in global product and channel expansion, innovative marketing, and growing digital capabilities including enhanced data analytics. The Zacks Consensus Estimate for 2021 has been revised upward by 5.1% in the past 30 days. The stock has gained 72.2% in the past year.

Price & Consensus: YETI