Zacks Analyst Blog Highlights OneWater Marine, Malibu Boats and Pool
For immediate release
Chicago, IL – June 2, 2022 – Zacks.com announces the list of stocks featured in the analyst blog. Every day, Zacks Equity Research analysts discuss the latest news and events impacting stocks and financial markets. Stocks recently featured in the blog include: OneWater Marine ONEW, Malibu Boats MBUU and Pool Corp. POOL.
Here are highlights from Wednesday’s analyst blog:
Hobby and leisure stocks come back into play as consumers open their wallets
The Hobby and Leisure Products industry, while in the top 16% of industries, is somewhat mixed. This is because the industry has had a few years of such strong growth that it is now dealing with tough competition even during the high season which is about to begin.
But looking more closely at individual actions, I see that this is not the case for all players. And that’s again because the industry is made up of a motley crowd that doesn’t necessarily pursue the same line of business. The lesson here seems to be that when picking stocks in any industry, it’s probably a good idea not to jump to conclusions, good or bad. Proper and thorough study of stocks remains the best way to select winners.
My research revealed two large sub-segments that remain particularly hot, the first being boating and the second being swimming pools.
As far as the boating market is concerned, the continued strength of demand this year is a driving factor. And as we’ve seen in the auto market, boats sell out even before they hit the lots.
OneWater Marine Management said the “company’s pre-sold inventory remains elevated at nearly double the level of the prior year period.” Malibu Boats management says “weeks on hand inventories continue to be approximately 13 weeks lower than previous historic lows.” They expect a build-up of channel stocks in 2023 and potentially 2024, at which time a normalization of channel stocks can be expected.
In a market where inventory remains low and demand so high, persistent supply chain challenges and a tight labor market are a recipe for price hikes. And that is exactly what is happening right now. As prices rise, the demand for larger, high-end boats in particular increases. Companies with larger retail networks, like OneWater, are in a slightly better position to meet increased demand because they can adjust inventory between locations.
One strategy that some boating companies are adopting is greater vertical integration, either with their sources of supply or with their distribution channel. OneWater, for example, acquires its dealerships while Malibu Boats acquires supply chain partners.
The pooling segment has benefited from the home-based economy over the past two years as people have invested in their backyards when they could go nowhere else. Since the market is only opening in spurts, companies are currently working on their backlogs, which should take another few months. But commercial demand is coming back, so demand for new pool construction remains strong.
The more stable growth of this segment actually comes from maintenance and repair, as it is an ongoing activity. Moreover, as the construction of new swimming pools has been quite high in the past two years, the existing base of swimming pools has expanded, thus increasing the demand for maintenance.
Companies like Pool Corp. which derive most of their revenue from maintenance and repair are therefore well positioned for growth. The management of the company even said that the supply chain problems related to supplies for maintenance works have eased lately, which is positive for the company.
Let’s see how the numbers for these companies are changing:
The Zacks Rank #1 (Strong Buy) stock estimate for fiscal year 2022 (ending June) is up 70 cents (10.2%) over the past 30 days. The 2023 estimate has increased by 65 cents (8.4%) over the same period.
OneWater is expected to increase revenue and profit by 28.6% and 30.3% respectively. Revenue and profit growth over the next year are expected to be 10.7% and 11.4%, respectively. The company has exceeded the Zacks consensus estimate in each of the past four quarters at an average rate of 16.4%.
The stock is trading at 6.8X, which is very cheap compared to the S&P 500’s 17.8X and the industry’s 16.9X. It’s also well below the company’s median level of 9.7X over the past year.
OneWater’s earnings estimate for fiscal year 2022 (ending September) has risen 48 cents (5.7%) over the past 30 days. Over the same period, the 2023 estimate has increased by 34 cents (3.6%). Its revenue and profit are expected to grow 42.6% and 27.8% respectively this year and 8.5% and 10.3% respectively next year.
The average surprise for the previous four quarters for the No. 1 Zacks Rank company is 25.0%. OneWater is priced even cheaper than Malibu at 3.6x earnings and also below its median level of 6.1x over the past year.
Over the past 60 days, analysts have raised Pool Corp’s 2022 estimate by 92 cents (5.2%) on average and its 2023 estimate by $1.00 (5.3%). They expect its 2022 and 2023 revenue to grow 19.5% and 7.0%, respectively.
Earnings for the two years are currently expected to rise 22.1% and 7.0%. Over the past four quarters, the No. 2 (buy) ranked company by Zacks has exceeded estimates at an average rate of 24.0%. Shares of Pool Corp are relatively expensive at 20.9X earnings, but that too is well below its median level of 32.3X over the past year.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.