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Bull of the Day: MarineMax (HZO)

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MarineMax (HZO - Free Report)  is a Zacks Rank #1 (Strong Buy) that is the nation's largest recreational boat and yacht retailer. The company sells new and used recreational boats, including pleasure boats, sport cruisers, mega-yachts, sport yachts, fishing boats, pontoon boats, motor boats, ski boats, and jet boats.

MarineMax offers premium brands like Sea Ray, Boston Whaler, Meridian, Hatteras, Azimut Yachts, Nautique and more.

The stock has been trading sideways for most of the summer. But after a recent earnings report that surprised to the upside, the stock is trending higher.

More About HZO

The company was founded in 1998 and is headquartered in Clearwater, FL. MarineMax employs about 1,500 people and sell through offsite locations and print catalog. The company has 77 retail locations, typically by water, that are scattered throughout the U.S.

The company is valued at $1.2 billion and offers no dividend. HZO has Zacks Style Scores of “A” in Value and Growth, but “C” in Momentum. The Forward PE is under 8, which makes the stock attractive to value investors.

Summer Sideways

Like a lot of stocks over the last few months, HZO saw some selling off its spring highs due to supply chain fears. The disruptions in the supply chain caused inventory issues, which concerned investors. The question isn’t about consumer demand, but rather is a company can deliver the products.

Earnings Beat

MarineMax eased many concerns when it reported a 25% EPS beat in late October. The company saw Q3 at $1.41 v the $1.27 expected, while revenues came in at $1.19B v the $1.15B expected. The company also raised FY21 guidance and affirmed FY21 margins.

All but one of the company’s four segments saw year over year growth. Marine revenues were up 25%, Aviation was up 19% and Fitness was up 4%. The laggard was the Outdoor segment, which was down 3% year over year.

Management cited strong demand for active lifestyle product as the reason for record consolidated revenues in the third quarter.

Estimates Rising

The strong earnings helped analysts take numbers higher across all-time frames. For next quarter, estimates have gone from $1.64 to $1.81 over the last 30 days, a hike of 10%. For the current year, we see a 9% jump in estimates for that same time frame.

After earnings Wedbush commented that “Record gross margins more than outweigh supply-chain-plagued SSS”. So, the margin improvement is what made the quarter. Wedbush says that the boat demand should see lasting benefits from the surge that started during the pandemic.

MarineMax, Inc. Price and EPS Surprise

MarineMax, Inc. Price and EPS Surprise

MarineMax, Inc. price-eps-surprise | MarineMax, Inc. Quote

 

The Technical Take

As sales took off during the COVID pandemic, the stock did as well. HZO dropped under $10 in March of 2020, but then quickly took off, making highs over $70 this past April.

From there, the stock sold off and fell over 35%, settling in the $45 area. The stock traded sideways around the $50 mark for about six months. During this time, moving averages flattened out, but investors held the HZO up, despite some 200-day moving average breaks.

Since earnings, the stock has started to trend higher. Investors are coming back in and HZO is now above all moving averages. Additionally, the stock is challenging the July highs and a move over that level could start a breakout.

Investors should look for that $55 area as the first spot of resistance and then eye $61 as the next important test. Above that level we could see the stock try for all-time highs again sometime next year.

In Summary

Boating is in demand thanks to the COVID-19 pandemic. People explored new ways to vacation and get out or their house, causing the camping and boating industries to benefit. Of course, all that stimulus money has helped, but the demand doesn’t seem to be fading.

Moreover, the company is managing supply chain disruptions effectively. The margins the company posted impressed Wall Street and will bring in new investors.


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