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BRUNSWICK CORP (BC)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 delivered above-expectation execution despite softer retail, with net sales $1.22B, GAAP diluted EPS $0.30, and adjusted diluted EPS $0.56; operating margin compressed to 4.6% GAAP and 5.9% adjusted amid lower absorption and FX headwinds .
  • Beat vs Wall Street: revenue $1.222B vs $1.136B consensus*, adjusted EPS $0.56 vs $0.22 consensus*; driven by recurring revenue channels (Engine P&A, repower, Freedom Boat Club, Navico aftermarket) contributing nearly 60% of adjusted operating earnings .
  • Guidance lowered to full-year net sales $5.0–$5.4B and adjusted EPS $2.50–$4.00 (from $5.2–$5.6B and $3.50–$5.00), reflecting tariff uncertainty and cautious consumer; Q2 guide: revenue $1.1–$1.3B and adjusted EPS $0.80–$1.10 .
  • Stock reaction catalysts: beat vs consensus*, explicit tariff headwind quantification ($100–$125M net impact at Mercury and China sales exposure), lean pipelines and sequential improvement in Propulsion, and “second best first quarter cash flow in more than a decade,” plus $26M buybacks .
  • Dividend maintained: $0.43/share declared on May 7, 2025, reinforcing capital return commitment .

Note: *Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

  • “All of our businesses delivered a strong first quarter… ahead of expectations despite the challenging macro environment,” aided by proactive pipeline management, new products, structural cost reductions, and efficient execution .
  • Recurring revenue strength: Engine P&A, repower, Freedom Boat Club, and Navico aftermarket contributed nearly 60% of adjusted operating earnings; distribution sales up 2% on same/next-day delivery capability; Freedom Boat Club trips up 3% sequentially .
  • Cash execution: “outstanding free cash flow generation… second best first quarter cash flow in more than a decade,” improving ~$160M vs Q1 2024; enabled ~$26M share repurchases .

What Went Wrong

  • Net sales down 10.5% YoY and adjusted operating margin down 450 bps YoY; GAAP diluted EPS down 70% YoY, reflecting lower wholesale, decreased production absorption, and FX headwinds .
  • Entry-level weakness: management is “considering streamlining” entry-level offerings given softness; OEM orders pressured at Navico; Boat segment sales down 13% YoY despite pricing .
  • Tariffs as emerging headwind: company estimates up to $100–$125M net tariff impact in 2025, with largest exposure at Mercury and China flows; uncertainty pressured Q2 guide and near-term volumes .

Financial Results

Headline Financials vs Prior Quarter

MetricQ4 2024Q1 2025
Revenue ($USD Billions)$1.155 $1.222
GAAP Operating Margin (%)-4.8% 4.6%
Adjusted Operating Margin (%)4.1% 5.9%
GAAP Diluted EPS ($)-$1.07 $0.30
Adjusted Diluted EPS ($)$0.24 $0.56

Q1 2025 vs Q1 2024

MetricQ1 2024Q1 2025YoY Change
Net Sales ($USD Billions)$1.365 $1.222 -10.5%
GAAP Operating Margin (%)8.1% 4.6% -350 bps
Adjusted Operating Margin (%)10.4% 5.9% -450 bps
GAAP Diluted EPS ($)$1.00 $0.30 -70%
Adjusted Diluted EPS ($)$1.35 $0.56 -58.5%

Segment Performance (Q1 2025 GAAP)

SegmentNet Sales ($MM)Op. Earnings ($MM)Op. Margin (%)YoY Net SalesYoY Op. Earnings
Propulsion$487.0 $46.1 9.5% -15.8% -44.3%
Engine Parts & Accessories$255.3 $39.1 15.3% -2.7% +17.8%
Navico Group$208.2 -$2.8 -1.3% -1.3% -16.7%
Boat$372.1 $7.7 2.1% -12.6% -73.8%
Segment Eliminations-$100.8 ——-10.2% —
Total$1,221.8 $56.3 4.6% -10.5% -49.1%

Segment Performance (Q1 2025 Adjusted)

SegmentNet Sales ($MM)Adjusted Op. Earnings ($MM)Adjusted Op. Margin (%)YoY Adjusted Op. Earnings
Propulsion$487.0 $46.5 9.5% -48.0%
Engine Parts & Accessories$255.3 $39.1 15.3% +7.1%
Navico Group$208.2 $11.2 5.4% -25.8%
Boat$372.1 $9.1 2.4% -71.2%
Corporate/Other—-$33.8 —-8.3%
Total$1,221.8 $72.1 5.9% -49.0%

KPIs

KPIQ1 2025Trend/Context
Cash & Marketable Securities ($MM)$305.5 +$18.8 vs YE 2024
Free Cash Flow ($MM)-$44.4 Improved by ~$160 vs Q1 2024
Share Repurchases ($MM)$25.6 Executed during Q1
Dividend Paid ($MM)$28.2 Q1 payments
Debt-to-Capitalization57.0% Up vs YE 2024 (55.3%)
U.S. Weeks on Hand (Boats)35.6 weeks Lower vs Q1 2024
Mercury US Outboard Share (LTM)+40 bps Continued gains; strong April indications
Distribution Sales (Engine P&A)+2% YoY Same/next day delivery advantage
FBC Trips+3% q/q Early-season usage strong
Boat Segment FBC Mix~11% of segment sales Supported by recent acquisitions

Guidance Changes

MetricPeriodPrevious Guidance (Jan 30, 2025)Current Guidance (Apr 24, 2025)Change
Net Sales ($B)FY 2025$5.2–$5.6 $5.0–$5.4 Lowered
Adjusted Diluted EPS ($)FY 2025$3.50–$5.00 $2.50–$4.00 Lowered
Adjusted Operating Margin (%)FY 20257.5–9.0 Not reiteratedN/A
Free Cash Flow ($MM)FY 2025>$350 >$350 Maintained
Revenue ($B)Q1 2025$1.0–$1.2 Actual $1.222 Beat vs high-end
Adjusted Diluted EPS ($)Q1 2025$0.15–$0.25 Actual $0.56 Beat
Revenue ($B)Q2 2025N/A$1.1–$1.3 New
Adjusted Diluted EPS ($)Q2 2025N/A$0.80–$1.10 New
Dividend per share ($)Q2 2025N/A$0.43 declared Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024, Q4 2024)Current Period (Q1 2025)Trend
Tariffs/MacroExpect healthier 2025; cautious Q4; hurricanes modest impact; pipeline tightly managed Explicit $100–$125M net tariff impact scenario; guidance lowered; modeling 5% revenue pressure and FX relief Deteriorating risk profile
Pipeline & InventoryU.S. pipeline ~32 weeks; plan to end year high-30s; wholesale to trail retail in 2024 U.S. weeks on hand 35.6; plan to remove ~1,000 units globally in 2025; lean premium pipelines supporting Q2 wholesale Improving efficiency
Premium vs Entry-LevelPremium resilient; entry-level weaker; promotions targeted Streamlining entry-level; premium demand steady; domestic production/mercury engines offer tariff advantage vs imports Mix shifting to premium
Mercury Share & Competitive Dynamics+420 bps in Q3; +130 bps YTD; production cutbacks impacted margins +40 bps LTM; potential advantage if competitors face inbound tariffs; sequential Propulsion improvement vs Q4 Share gains sustained
Navico Group Products/AftermarketStability; new product launches; Q4 marginally up expected Sequential sales growth vs Q4; slight YoY decline; new Eagle/ELITE FX MFDs; trolling motor; aftermarket strong Stabilizing with product cadence
Financing & Dealer HealthLower rates benefit likely in 2025; dealer cautiousness Retail financing ~8%, steady; dealer health strong post-curtailment holiday Stable
Freedom Boat ClubMembership growth; acquisitions; resilient model Trips steady; ~11% Boat segment sales; expanding globally Growing recurring revenue

Management Commentary

  • “All of our businesses delivered a strong first quarter… ahead of expectations… despite the challenging macro environment.” — CEO David Foulkes .
  • “Our recurring revenue businesses and channels… contributed nearly 60 percent of our first quarter adjusted operating earnings.” — CEO David Foulkes .
  • “Up to $100–$125 million of incremental net tariff costs in 2025… we continue to prepare for a range of scenarios… including migration of our supply base, inventory staging, pricing, and optimization of our facilities.” — CEO David Foulkes .
  • “Adjusted EPS of $0.56… down versus prior year due to lower sales, lower absorption… and FX, partially offset by price, new product momentum, and cost control.” — CFO Ryan Gwillim .
  • “One potential benefit is non-U.S. engine manufacturers paying tariffs on importation of engines… that would be a pretty nice advantage for Mercury.” — CFO Ryan Gwillim .

Q&A Highlights

  • Guidance range drivers: High-end assumes tariff moderation and better-than-anticipated mitigation; low-end assumes persistent tariff pressure and volume decline .
  • Tariff magnitude and mitigation: Largest exposure is China supply; USMCA mitigates Mexico/Canada; timing factors (duty drawback/substitution) can benefit 2026 .
  • Q2 outlook and back half setup: Q2 includes capitalized tariff impact; sales conservatism given uncertainty; back half benefits from more efficient operations and absorption recovery vs 2024’s depressed production .
  • Entry-level strategy: Reducing number of models; prioritizing investment in higher-margin/premium offerings while considering Mercury/Navico ecosystem impacts .
  • Financing/Dealer health: Retail rates steady around ~8%; dealer financing and health remain strong; promotional tactics more targeted (cash back effective) .

Estimates Context

MetricConsensus*Actual/Guide
Q1 2025 Revenue ($B)$1.136*$1.222
Q1 2025 Adjusted EPS ($)$0.22*$0.56
Q2 2025 Revenue ($B)$1.257*Guide: $1.1–$1.3
Q2 2025 Adjusted EPS ($)$0.95*Guide: $0.80–$1.10
FY 2025 Adjusted EPS ($)$3.25*Guide: $2.50–$4.00
FY 2025 Revenue ($B)$5.232*Guide: $5.0–$5.4

Note: *Values retrieved from S&P Global. During the call, one analyst characterized Q2 guidance as “materially beneath the Street” at that time .

Key Takeaways for Investors

  • Q1 was a clean beat vs consensus* on both revenue and EPS, driven by recurring revenue channels and disciplined pipeline management; segments with aftermarket exposure continue to buffer cyclical pressure .
  • Guidance reset embeds tariff uncertainty and cautious consumer; management quantified scenarios and outlined mitigation levers (sourcing migration, duty drawback, targeted pricing) to narrow the impact over time .
  • Propulsion and Boat segments showed sequential improvement vs Q4 2024 as production efficiency normalizes; expect absorption tailwinds in H2 vs last year’s depressed production .
  • Premium brands/pipelines remain lean, supporting wholesale stability even if retail hesitates; entry-level portfolio will be streamlined to protect margins and capital allocation .
  • Cash discipline remains strong: second-best Q1 cash flow in a decade, dividend declared ($0.43/share), and ongoing buybacks; balance sheet metrics stable though debt-to-cap ticked up .
  • Watch tariffs as a key swing factor: Mercury may gain relative advantage if competitors face inbound tariffs; FX becoming a “good guy” near term per CFO .
  • Near-term trading: Expect sensitivity to tariff headlines and Q2 execution vs guide; Medium-term thesis hinges on recurring revenue stability, premium mix, Mercury share gains, and cost actions translating to margin recovery .