Morgan Stanley: Brunswick beats third-quarter profit expectations as softer boat retail weighs on fourth-quarter guidance

What drove the third-quarter beat?

Brunswick reported adjusted third-quarter earnings per share of $1.58, above its guidance of $1.20–$1.40, Morgan Stanley’s estimate of $1.40 and the market consensus of $1.32. A tariff refund of approximately $3 million contributed an estimated $0.04 per share, according to the bank.
Quarterly revenue was $1.45 billion, up 6.9% year over year, with growth across all four businesses and every region. Adjusted operating margin was 10.1%, up approximately 2.3 percentage points year over year and above the market consensus of 9.2%.
The margin improvement came from a greater share of premium products and higher-margin engine parts and accessories, alongside gains in efficiency and productivity.

The company said boat retail sales were flat year to date, similar to the cumulative performance at the end of the second quarter, but the retail environment softened during the third quarter. In response, it introduced targeted promotions and tightened cost controls.
By segment, year-to-date retail sales of premium fiberglass boats globally and the company’s core brands in the United States were flat, while value products were weaker. The company lowered its full-year boat business sales growth outlook from high single digits to mid-to-high single digits.
Boat usage also slowed: Freedom Boat Club member trips rose 3% year over year to date, down from 13% in the first half.

The company raised its 2026 adjusted earnings per share guidance from $4.35–$4.75 to approximately $4.65, increasing the midpoint by $0.10. Its full-year guidance for revenue of $5.7 billion–$5.8 billion and an operating margin of approximately 8% was unchanged.
Third-quarter earnings per share exceeded the midpoint of the original guidance by $0.28, but the full-year guidance increase reflected only part of that amount. Morgan Stanley estimates that a lower tax rate and net interest expense contributed approximately $0.12 and $0.06 per share, respectively, together exceeding the increase in full-year guidance.
The new full-year guidance implies fourth-quarter adjusted earnings per share of approximately $0.82, above Morgan Stanley’s estimate of $0.74 but approximately 15% below the market consensus of $0.96. The company had previously exceeded its own quarterly guidance for eight consecutive quarters.

The bank believes that the third-quarter earnings beat was offset by softer retail conditions during the quarter and relatively low fourth-quarter guidance. With the share price also having risen before the earnings release, it sees a possible pullback.
Morgan Stanley maintained its Equal-weight rating and $74 price target. It recognizes the relatively resilient earnings of the company’s propulsion systems and parts and accessories businesses, while noting that the operating environment remains challenging amid higher interest rates.