At an investor meeting last week, Brunswick Corp. revealed a new three-year growth plan through 2018. Backed by a continuing, steadily improving global marine marketplace, revenue is projected to expand at a compound annual growth rate of 7 to 9 percent.
The plan assumes modest recoveries continue in both the U.S. economy and the global marine engine market. Unit growth in its core marine segment is expected in the 3 to 5 percent range. Marine unit volume is expected to end this year at 177,000 units and reach a range of 195,000 to 205,000 units by 2018.
The marine segment is expected to benefit from the trend of consumers opting for boats with both greater content and higher horsepower engines, although at a lesser pace than previous years. Due in part to the strong dollar, only modest expansion in pricing is assumed over the period. Acquisitions are also expected to add to the marine growth rate.
The growth opportunities for Brunswick Corp. overall also includes executing acquisitions to grow its fitness and engine parts and accessories businesses as well as adjacency growth initiatives, including the InMovement and Active Aging businesses recently launched in its fitness category.
Overall, commercial and consumer market fitness sales are expected to expand at around 5 percent, supported by encouraging health & wellness trends such as a steady 4-percent growth in health club memberships in recent years, the needs of an aging population and momentum around corporate wellness programs. Fitness segment sales for Brunswick (which include its Life Fitness, Hammer Strength and recently acquired SCIFIT brands) are expected to grow at a slightly higher rate than the overall market due to expected market share gains and its strategic focus on the rehab, aging and corporate wellness opportunities.
Operating earnings are projected to grow at an annual rate of 13 percent to 17 percent, which is consistent with its prior three-year plan and is slightly below two-times the rate of sales growth. This growth includes benefits for both margin expansion and increased sales volumes.
Gross margins are expected to improve modestly as the benefits from volume as well as a strong focus on cost and price actions help to mitigate the impact of inflation. Operating margin expansion will be also be aided by operating expense leverage as operating expenses are expected to grow at approximately half the rate of sales growth. Operating earnings leverage is projected to be in the high-teens.
EPS is projected to grow between 15 percent to 19 percent annually with a target of $4.35 to $4.75 per share in 2018. EPS in 2016 is projected to be in a range of $3.20 to $3.40.
–Tom Ryan
