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3 Leisure & Recreation Products Stocks to Watch Despite Industry Woes
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The Zacks Leisure and Recreation Products industry faces challenges due to elevated inflation and a sluggish global economy. Nevertheless, there is a positive trend in the sales of fitness products, driven by growing health and fitness awareness and strong boat sales. The industry participants — which design, market, retail and distribute products for the outdoor and recreation market — are witnessing solid demand. Stocks like Academy Sports and Outdoors, Inc. (ASO - Free Report) , Acushnet Holdings Corp. (GOLF - Free Report) and American Outdoor Brands, Inc. (AOUT - Free Report) are likely to benefit from the trend mentioned above.
Industry Description
The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, swimming pools, marine products, golf courses, boat repair and maintenance services and other ancillary services. The services include indoor and outdoor storage, marine, boat rentals and personal watercraft. Some industry participants manufacture outdoor equipment and apparel for climbing, mountaineering, backpacking and skiing. A few companies also provide connected fitness products and subscriptions for multiple household users. Industry players primarily thrive on overall economic growth, which fuels consumer demand for products. The demand — highly dependent on business cycles — is driven by a healthy labor market, rising wages and growing disposable income.
3 Trends Shaping the Future of the Leisure and Recreation Products Industry
Concerns of Slowing Global Economy & High Inflation: A slowdown in the global economy is likely to hurt the industry. Inflation in the United States is the biggest challenge for the economy. In October, the seasonally adjusted Consumer Price Index for All Urban Consumers remained stable, while the unadjusted index showed a 3.2% increase in the past 12 months. The numbers are far from the Federal Reserve’s ambitious target of 2% for a strong economy. Inflationary cost increases in labor, compensation, healthcare, freight and rent lead to higher expenses.
New Boat Sales: New boat sales declined in 2022. Per National Marine Manufacturers Association (NMMA) reports, new powerboat sales were 250,000 units in 2022, down 17% from the year-ago levels. The downside was primarily caused by uncertain economic conditions and supply chain turbulence. New boat sales decline is likely to have persisted in 2023.
Booming Golf Business: The golf industry has been doing exceptionally well amid the pandemic. Golf is benefiting from an increase in the participation of young people. Technology has also been playing a vital role in reshaping the sport. India and China have become two of the most significant emerging golf markets.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects.
The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #216, which places it in the bottom 14% of more than 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are seemingly losing confidence in this group’s earnings growth potential. Since Jun 30, 2023, the industry's earnings estimates for 2023 have declined 17.9%.
Before we present a few stocks from the industry that you may want to hold, let’s look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Leisure and Recreation Products industry has underperformed the Zacks S&P 500 composite but outperformed its sector over the past year. Stocks in this industry have collectively increased 0.9% over the past year compared with the S&P 500’s gain of 16.1%. The Zacks Consumer Discretionary sector has risen 7.2% 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 21.47X compared with the S&P 500’s 19.09X and the sector’s 16.96X. In the past five years, the industry has traded as high as 44.86X and as low as 12.36X, with the median being at 21.99X, as the charts show.
Forward Price to Earnings Ratio Compared With S&P
3 Leisure & Recreation Products Stocks to Watch
Academy Sports and Outdoors: Based in Katy, TX, the company, through its subsidiaries, operates as a retailer of sporting goods and outdoor recreational products in the United States. It benefits from robust consumer demand across all markets and merchandise divisions, primarily Sports & Recreation. An increase in demand for indoor and outdoor games, bikes, fitness equipment and outdoor cooking bodes well. Partnerships with vital national brands, such as Nike, Adidas, Under Armour, Columbia and The North Face, are encouraging.
Acushnet Holdings: This Fairhaven, MA-based company designs, develops, manufactures and distributes golf products in the United States, Europe, the Middle East, Africa, Japan and Korea. This Zacks Rank #3 company will likely benefit from increased demand for golf balls. The company gains from a healthy order backlog, strong at-once demand, lean channel inventories and gradually increasing output levels.
The company’s sales and earnings in 2023 are expected to witness growth of 5.8% and 5.9% year over year, respectively. The stock has increased 19.7% in the past year.
Price & Consensus: GOLF
American Outdoor Brands: Headquartered in Columbia, MO, the company supplies outdoor goods and accessories designed for adventurous individuals both in the United States and globally. The firm is experiencing positive results from strong net sales, effective capital management and continual advancement toward achieving its long-term strategic goals.
The company’s sales and earnings in 2023 are expected to witness growth of 3.2% and 4.2% year over year, respectively. The stock has declined 26.3% in the past year.
Price & Consensus: AOUT
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3 Leisure & Recreation Products Stocks to Watch Despite Industry Woes
The Zacks Leisure and Recreation Products industry faces challenges due to elevated inflation and a sluggish global economy. Nevertheless, there is a positive trend in the sales of fitness products, driven by growing health and fitness awareness and strong boat sales. The industry participants — which design, market, retail and distribute products for the outdoor and recreation market — are witnessing solid demand. Stocks like Academy Sports and Outdoors, Inc. (ASO - Free Report) , Acushnet Holdings Corp. (GOLF - Free Report) and American Outdoor Brands, Inc. (AOUT - Free Report) are likely to benefit from the trend mentioned above.
Industry Description
The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, swimming pools, marine products, golf courses, boat repair and maintenance services and other ancillary services. The services include indoor and outdoor storage, marine, boat rentals and personal watercraft. Some industry participants manufacture outdoor equipment and apparel for climbing, mountaineering, backpacking and skiing. A few companies also provide connected fitness products and subscriptions for multiple household users. Industry players primarily thrive on overall economic growth, which fuels consumer demand for products. The demand — highly dependent on business cycles — is driven by a healthy labor market, rising wages and growing disposable income.
3 Trends Shaping the Future of the Leisure and Recreation Products Industry
Concerns of Slowing Global Economy & High Inflation: A slowdown in the global economy is likely to hurt the industry. Inflation in the United States is the biggest challenge for the economy. In October, the seasonally adjusted Consumer Price Index for All Urban Consumers remained stable, while the unadjusted index showed a 3.2% increase in the past 12 months. The numbers are far from the Federal Reserve’s ambitious target of 2% for a strong economy. Inflationary cost increases in labor, compensation, healthcare, freight and rent lead to higher expenses.
New Boat Sales: New boat sales declined in 2022. Per National Marine Manufacturers Association (NMMA) reports, new powerboat sales were 250,000 units in 2022, down 17% from the year-ago levels. The downside was primarily caused by uncertain economic conditions and supply chain turbulence. New boat sales decline is likely to have persisted in 2023.
Booming Golf Business: The golf industry has been doing exceptionally well amid the pandemic. Golf is benefiting from an increase in the participation of young people. Technology has also been playing a vital role in reshaping the sport. India and China have become two of the most significant emerging golf markets.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects.
The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #216, which places it in the bottom 14% of more than 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are seemingly losing confidence in this group’s earnings growth potential. Since Jun 30, 2023, the industry's earnings estimates for 2023 have declined 17.9%.
Before we present a few stocks from the industry that you may want to hold, let’s look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Leisure and Recreation Products industry has underperformed the Zacks S&P 500 composite but outperformed its sector over the past year. Stocks in this industry have collectively increased 0.9% over the past year compared with the S&P 500’s gain of 16.1%. The Zacks Consumer Discretionary sector has risen 7.2% 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 21.47X compared with the S&P 500’s 19.09X and the sector’s 16.96X. In the past five years, the industry has traded as high as 44.86X and as low as 12.36X, with the median being at 21.99X, as the charts show.
Forward Price to Earnings Ratio Compared With S&P
3 Leisure & Recreation Products Stocks to Watch
Academy Sports and Outdoors: Based in Katy, TX, the company, through its subsidiaries, operates as a retailer of sporting goods and outdoor recreational products in the United States. It benefits from robust consumer demand across all markets and merchandise divisions, primarily Sports & Recreation. An increase in demand for indoor and outdoor games, bikes, fitness equipment and outdoor cooking bodes well. Partnerships with vital national brands, such as Nike, Adidas, Under Armour, Columbia and The North Face, are encouraging.
In the past year, shares of this Zacks Rank #3 company have increased 2.2%. The company has an impressive long-term earnings growth rate of 10.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price & Consensus: ASO
Acushnet Holdings: This Fairhaven, MA-based company designs, develops, manufactures and distributes golf products in the United States, Europe, the Middle East, Africa, Japan and Korea. This Zacks Rank #3 company will likely benefit from increased demand for golf balls. The company gains from a healthy order backlog, strong at-once demand, lean channel inventories and gradually increasing output levels.
The company’s sales and earnings in 2023 are expected to witness growth of 5.8% and 5.9% year over year, respectively. The stock has increased 19.7% in the past year.
Price & Consensus: GOLF
American Outdoor Brands: Headquartered in Columbia, MO, the company supplies outdoor goods and accessories designed for adventurous individuals both in the United States and globally. The firm is experiencing positive results from strong net sales, effective capital management and continual advancement toward achieving its long-term strategic goals.
The company’s sales and earnings in 2023 are expected to witness growth of 3.2% and 4.2% year over year, respectively. The stock has declined 26.3% in the past year.
Price & Consensus: AOUT