Bear Of The Day: OneWater Marine

OneWater Marine Inc. (ONEW) is seeing the boat retail market normalize after the pandemic buying frenzy in the industry. But that means this Zacks Rank #5 (Strong Sell) recently slashed its full-year earnings guidance.

OneWater Marine is one of the largest premium marine retailers in the United States. It operates 100 retail locations, 11 distribution centers/warehouses and multiple online marketplaces in 20 states.

OneWater sells new and pre-owned boats, does financing and sells insurance products, parts and accessories as well as maintenance, repair and other services.

 

Big Miss in the Fiscal Third Quarter

On Aug 3, 2023, OneWater Marine reported fiscal third quarter results and missed on the Zacks Consensus Estimate by 42.3%. It reported $1.95 versus the Zacks Consensus of $3.38, for a miss of $1.43.

It has now missed 3 out of the last 4 quarters.

Despite the miss, revenue was up 4% to a new fiscal third quarter record of $594 million due to strong pre-owned boat sales and a 23% jump in service, parts and other revenue to $92 million.

However, dealership same-store-sales were flat year-over-year.

“In a deteriorating selling environment, our team did a great job driving a 4% increase in sales, maintaining flat dealership same-store sales and aggressively managing overall boat inventory," said Austin Singleton, CEO.  

"The marine industry continues to transition back to historical norms and moderated pricing. However, the pace of this transition accelerated ahead of expectations, which pressured margins in the third quarter,” he added.

Like other retailers, high inventory has been a problem. As of June 30, 2023, total inventory increased to $572.9 million up from $269.4 million on June 30, 2022. This was due primarily to normalization of supply chain and acquisitions completed during the year.

Total inventory did decrease $20.4 million sequentially supported by OneWater Marine's focus to end the selling season with appropriate levels of inventory.

 

Big Cut to Full Year Earnings Guidance

OneWater Marine updated its prior guidance for the full fiscal year 2023. It now anticipated same-store-sales to be flat with earnings in the range of $4.45 to $4.70. That guidance range was well under the Zacks Consensus.

As a result, 3 estimates were lowered for fiscal 2023 since the earnings report. It has pushed the Zacks Consensus down to $4.58 from $7.28. That's an earnings decline of 49.8% as the company made $9.13 last year.

Analysts were also bearish on fiscal 2024 with 4 estimates cut for that year. Those revisions pushed the Fiscal 2024 Zacks Consensus Estimate down to $4.19 from $6.31 prior to the earnings report. That's a further earnings decline of 8.5%.

 

Shares Plunge on the Revised Guidance

Shares of OneWater Marine took a hit on the slashed guidance. They fell 27.8% over the last week and are now down 6.3% year-to-date.

(Click on image to enlarge)

Zacks Investment Research

Image Source: Zacks Investment Research

OneWater is cheap, with a forward P/E of 5.9 but with earnings being revised lower, the stock could be a value trap.

Investors may want to wait for stabilization in the boat industry before jumping in. Be sure to watch for positive changes to OneWater Marine's earnings estimates going forward into fiscal 2024.


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