E MarineMax: Soft 2017 Guidance Punished Bigly

Earnings Summary

On November 1st, MarineMax (NYSE: HZO) reported Fiscal 4Q earnings. For the quarter, EPS came in at $0.18 on revenue of almost $227.4M. Sales climbed over 20% y/y and EPS rose 38% y/y after stripping out one-offs. MarineMax also enjoyed same-store sales growth of 12% against a strong comp.

One-Year Stock Price Chart

Gross margin fell 60 bps y/y in 4Q and now stands at 24.8%. SG&A, however, fell 50 bps as a percentage of revenue to 21.6%. Expense leverage is definitely improving the operating margin as MarineMax has been able to sell significantly more boats without adding numerous new dealerships. The current dealer footprint is operating more efficiently than in the past.

Guidance: FY17 EPS guidance was $1.04–$1.14, and sales guidance wasn’t offered. (No surprise.) Forward View had previously forecast FY17 EPS of $1.24, and we were just a little above the consensus. Thus, guidance was certainly lackluster, and the stock plummeted from almost $21.50 to $15.80 by the end of the week. Selling pressure hasn’t quite abated yet.

Best & Worst News

Best News

MarineMax continues to see strong industry dynamics and inventory levels. There’s no sign of a slow-down in the boating sector, especially in the high-end models sold by MarineMax. Affluent Americans enjoy significant disposable income and remain generally optimistic about their future. As long as the wealthy don’t decide to hold cash, MarineMax has room to sail because the boating sector is still around 30% below its pre-recession peak (on a units-sold basis). Interestingly, MarineMax’s gross margin has suffered slightly because big boats (yachts!) are out-selling smaller ones. A small price increase for the yachts might be warranted next year as demand for such status symbols isn’t price-sensitive. (For those of you with Economics degrees, that means that yacht demand is price inelastic, ceteris paribus.) Still, while sales of larger vessels slightly crimp gross margin, the strong gains in revenue from yacht sales also ensure that SG&A leverage steadily climbs. What is removed from gross margin, then, is partially offset by improvement further down the income statement. With a slight tweak in pricing. MarineMax can have the best of both worlds, so we’re not forecasting any issues with margins.

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Analyst Certification: I, Nathan Yates, certify that the views expressed in this publication accurately reflect my personal views about the subject companies and their securities. I ...

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