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Leisure & Recreation Product Industry Outlook: Prospects Bright
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The Zacks Leisure and Recreation Products industry covers companies providing amusement and recreational products such as swimming pools, golf courses, boats, outdoor spaces, to name a few. A couple of companies within the industry manufacture outdoor equipment and apparels for climbing, mountaineering, backpacking and skiing.
The industry, as a whole, primarily thrives on overall economic growth. Consumer demand for products is purely subject to general economic conditions. Demand is highly dependent on the business cycle and gains momentum from a healthy labor market, rising wages and growing disposable income.
Let’s take a look at the industry’s three major themes:
The current U.S. economy has a Goldilocks scenario, operating in an optimal state by providing full employment and economic stability. The economy is neither too dull to cause recession, nor too bright to result in inflation. Given this, one can expect leisure product providers to gain on increased consumer demand. However, these companies continue to show volatile traits given the tricky nature of consumer discretionary spending. Also, inflation and tariff concerns are intermittently affecting leisure stocks.
The industry is highly vulnerable to changing weather conditions. For instance, demand for skiing directly depends on the amount and timing of snowfall. Further, swimming pool manufacturers always witness higher demand in summer. Additionally, there is a general boost in demand for outdoor and sports activities during the holiday season. Most companies in the recreational product space have specific quarters of revenue growth. For Pool Corporation (POOL - Free Report) , sales are favored by weather conditions in the second and third quarter of a calendar year while unseasonably warm conditions in spring or early winters affect sales.
The U.S. economic outlook is healthy according to key economic indicators that will support the industry’s growth. The economy has an ideal GDP growth rate of 2-3% and moderately rising prices, as measured by the core inflation rate. The Federal Reserve has set the target inflation rate for 2019 at 2%. Apart from higher personal expenditure, increased demand for leisure products and services is aiding the leisure industry. According to a report by Statista, revenues at the sports and outdoor space are expected to witness a compound annual growth rate (CAGR) of 9% from 2018 to 2023. User penetration was 12.2% in 2018 and is expected to reach 16.7% by 2023. Per Deloitte, retailers of leisure goods have witnessed strong growth since 2010. Furthermore, a report by Global Market Insights suggests that the boating market share in the United States will surpass $28.5 billion by 2024. National Marine Manufacturers Association had also mentioned that boat manufacturers are continuously increasing production to support high demand. Demand for powerboats, including small sterndrive, wakeboard boats and smaller fiberglass boats with jet technology, is rapidly rising.
Zacks Industry Rank Indicates Solid Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #91, which places it at the top 36% of more than 250 Zacks industries.
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. 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 trend in collective earnings estimate revisions of the constituent companies indicates a solid earnings outlook for the industry, which in turn has helped it secure a position in the top 50%. In other words, the sell-side analysts covering the companies in this Zacks industry have been steadily raising their estimates.
Our proprietary Heat Map shows that the industry’s rank has remained in the top half in seven out of eight weeks.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags on Shareholder Returns
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 3.8% over the past year versus the S&P 500’s gain of 8.4% and the Zacks Consumer Discretionary sector’s increase of 3.2%. One Year Price Performance
Valuation
On the basis of forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing leisure product stocks, the industry trades at 15.36X versus the S&P 500’s 17.18X and the sector’s 18.94X.
Forward Price To Earnings Ratio Compared With S&P
Over the past five years, the industry has traded as high as 18.89X, as low as 12.10X and at the median of 16.08X, as the charts show.
Forward Price To Earnings Ratio Compared With Sector
Bottom Line
Despite tariff and inflationary concerns, the leisure product space is expected to gain from lower unemployment and continued economic growth.
Below are three stocks with positive earnings estimate revisions and a favorable Zacks Rank.
Clarus Corporation (CLAR - Free Report) designs, manufactures and markets outdoor equipment for climbing, mountaineering, backpacking and skiing. The company carries a Zacks Rank #1 (Strong Buy). Earnings estimates for the current year have increased 2.6% over the past two months to 80 cents. This suggests that earnings per share will grow 25% year over year in 2019. The company’s shares have returned 82.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: CLAR
Pool Corporation, a swimming pool maker, carries a Zacks Rank #2 (Buy). Its shares have gained 27.4% in the past year. Earnings estimates for 2019 have been revised 0.2% upward over the past 60 days to $6.19, indicating 10.1% growth from 2018.
Price and Consensus: POOL
Outdoor recreational product manufacturer, YETI Holdings, Inc. (YETI - Free Report) , carries a Zacks Rank #2. The company’s shares have returned 81.8% in the past year. Earnings estimates for the current year have increased 2% over the past two months to $1.04, suggesting an increase of 14.3% from the prior year.
Price and Consensus: YETI
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Image: Bigstock
Leisure & Recreation Product Industry Outlook: Prospects Bright
The Zacks Leisure and Recreation Products industry covers companies providing amusement and recreational products such as swimming pools, golf courses, boats, outdoor spaces, to name a few. A couple of companies within the industry manufacture outdoor equipment and apparels for climbing, mountaineering, backpacking and skiing.
The industry, as a whole, primarily thrives on overall economic growth. Consumer demand for products is purely subject to general economic conditions. Demand is highly dependent on the business cycle and gains momentum from a healthy labor market, rising wages and growing disposable income.
Let’s take a look at the industry’s three major themes:
Zacks Industry Rank Indicates Solid Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Zacks Consumer Discretionary sector. It carries a Zacks Industry Rank #91, which places it at the top 36% of more than 250 Zacks industries.
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. 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 trend in collective earnings estimate revisions of the constituent companies indicates a solid earnings outlook for the industry, which in turn has helped it secure a position in the top 50%. In other words, the sell-side analysts covering the companies in this Zacks industry have been steadily raising their estimates.
Our proprietary Heat Map shows that the industry’s rank has remained in the top half in seven out of eight weeks.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Lags on Shareholder Returns
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 3.8% over the past year versus the S&P 500’s gain of 8.4% and the Zacks Consumer Discretionary sector’s increase of 3.2%.
One Year Price Performance
Valuation
On the basis of forward 12-month price-to-earnings ratio, which is a commonly used multiple for valuing leisure product stocks, the industry trades at 15.36X versus the S&P 500’s 17.18X and the sector’s 18.94X.
Forward Price To Earnings Ratio Compared With S&P
Over the past five years, the industry has traded as high as 18.89X, as low as 12.10X and at the median of 16.08X, as the charts show.
Forward Price To Earnings Ratio Compared With Sector
Bottom Line
Despite tariff and inflationary concerns, the leisure product space is expected to gain from lower unemployment and continued economic growth.
Below are three stocks with positive earnings estimate revisions and a favorable Zacks Rank.
Clarus Corporation (CLAR - Free Report) designs, manufactures and markets outdoor equipment for climbing, mountaineering, backpacking and skiing. The company carries a Zacks Rank #1 (Strong Buy). Earnings estimates for the current year have increased 2.6% over the past two months to 80 cents. This suggests that earnings per share will grow 25% year over year in 2019. The company’s shares have returned 82.7% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: CLAR
Pool Corporation, a swimming pool maker, carries a Zacks Rank #2 (Buy). Its shares have gained 27.4% in the past year. Earnings estimates for 2019 have been revised 0.2% upward over the past 60 days to $6.19, indicating 10.1% growth from 2018.
Price and Consensus: POOL
Outdoor recreational product manufacturer, YETI Holdings, Inc. (YETI - Free Report) , carries a Zacks Rank #2. The company’s shares have returned 81.8% in the past year. Earnings estimates for the current year have increased 2% over the past two months to $1.04, suggesting an increase of 14.3% from the prior year.
Price and Consensus: YETI
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 7 stocks to watch. The report is only available for a limited time.
See 7 breakthrough stocks now>>