Brunswick: Investor Day Update Doesn’t Sway Our Long-Term Intrinsic Value Inputs

We don’t plan to alter our $118 fair value estimate for narrow-moat Brunswick BC after considering the 2027 outlook offered at its Sept. 18 investor event and view shares as attractive. Brunswick launched inaugural 2027 goals that include $8.7 billion in sales, a 16% operating margin, and $15 in EPS. Although all three of these metrics trail its prior 2025 goals—that included $10 billion in sales, a 17% operating margin, and $16-$17.50 in EPS—they are ahead of our 2027 forecast for $7.8 billion in sales, a 15% operating margin, and $13.79 in EPS. We plan to bump our 2027 estimates for sales and EPS to $8 billion and $14.60, respectively, while maintaining our 15% operating margin expectation. With fiscal 2023 sales now set to arrive near the low end of prior guidance of $6.7 billion and wholesale softness that could persist longer than anticipated, we have modestly lowered our outlook for the next 18 months to account for a slower improvement in category spending.

Much of Brunswick’s outlook is contingent on industry demand in 2025-27 recovering well, but we remain more cautious given limited visibility 24 months out. However, we still believe Brunswick can grow faster than the market over time considering its opportunity set. In fact, we think the ecosystem that the firm has built supports less cyclicality over time, given that Navico and engines can sell into boats, boats can sell into shared access channels, and shared access can drive repower and used boat sales (Boateka). The operating margin walk to a midteens level seems reasonable as significant cost savings have been set in motion at Navico and greater efficiencies across the portfolio should surface from steps being taken. We surmise that a slightly larger proportion of profit improvement should come at the front of the 2023-27 financial plan as the restructuring of Navico is likely to show immediate improvement. In our opinion, these gains should yield long-term operating margins between 15%-16%.