BRUNSWICK CORP (BC)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 net sales were $1.447B and as-adjusted diluted EPS was $1.16, both ahead of internal guidance ranges; GAAP operating margin was 7.1% and adjusted operating margin was 8.7% .
• Results materially beat Wall Street consensus: revenue by ~$0.19B and EPS by ~$0.21; Q1 and Q4 also posted revenue/EPS beats, indicating sustained estimate outperformance and likely upward revisions to Q3/Q4 models* .
• Full-year guidance maintained at the midpoint: net sales ≈$5.2B and adjusted EPS ≈$3.25; free cash flow raised to >$400M; Q3 revenue guided to $1.1–$1.3B and adjusted EPS to $0.75–$0.90 .
• Catalysts: Mercury’s new V10 425hp and enhanced 350hp Verado launches, ongoing share gains in high-horsepower outboards, and Freedom Boat Club’s Dubai expansion; tariff dynamics and OEM ordering patterns remain key narrative drivers .

What Went Well and What Went Wrong

What Went Well

• Propulsion segment sales +7% YoY with sequential earnings improvement; Mercury gained >300 bps share in >300hp engines and 30 bps overall on a rolling 12-month basis .
• Record cash generation: $288M free cash flow in Q2; first-half free cash flow $244M, up $279M YoY; YTD share repurchases of $43M .
• Recurring-revenue businesses (engine P&A, repower, Freedom Boat Club, Navico aftermarket) contributed nearly 60% of adjusted operating earnings, underpinning resilience .

What Went Wrong

• Adjusted operating margin compressed YoY (8.7% vs 12.5%) on reinstated variable compensation, lower absorption, and tariffs; GAAP operating earnings -35% YoY .
• Navico Group sales -4% YoY with adjusted operating margin down to 5.3% from 7.4%; market and tariff headwinds persisted despite product momentum .
• Boat segment sales -7% YoY on cautious wholesale ordering in value categories; margins compressed despite pricing actions; dependence on promotions in entry-level products continues .

Financial Results

Segment Net Sales ($USD Millions)

Segment GAAP Operating Margin (%)

KPIs and Balance Sheet

Estimates vs Actuals (S&P Global consensus)

Values retrieved from S&P Global.*

Guidance Changes

Also note initial January guidance of net sales $5.2–$5.6B and adjusted EPS $3.50–$5.00, subsequently updated in April given tariff uncertainty .

Earnings Call Themes & Trends

Management Commentary

• “Brunswick delivered strong second quarter results… despite the challenging macro environment and uncooperative weather… the resilient, recurring, aftermarket-focused portions of our portfolio resulted in performance ahead of expectations” — David Foulkes .
• “Mercury’s outboard engine lineup continues to take market share, gaining over 300 bps in >300hp… 30 bps overall… reinforced by new 425 and 350hp engines launched earlier this week” — David Foulkes .
• “We had another quarter of outstanding free cash flow generation, with $288 million… a record for any second quarter” — David Foulkes .
• “Despite… tariffs… we’re holding the midpoint of guidance: sales ≈$5.2B and adjusted EPS ≈$3.25; raising free cash flow guidance to >$400M” — Ryan Gwillim .
• “We will shortly be launching AI powered customer service tools… autonomous docking system remains on-track to launch later this year” — David Foulkes .

Q&A Highlights

• Tariff impact and EPS: April bridge assumed ~$1 EPS impact; mitigation better than anticipated; overall tariff effect now lower than initial fears, guidance midpoint maintained at $3.25 .
• Q3 vs Q4 phasing: Do not over-interpret; production increases in H2 vs very light H2 2024 comps; steady second half expected .
• Navico long-term targets: Low-to-mid teens operating margin with mid-to-high single-digit top-line CAGRs; restructuring, product refresh, and complexity reduction underway .
• Segment tariff distribution: 75–80% impact in Propulsion, small in Boats; mid-teens $M P&L impact in Q2 after offsets; potential competitive tailwind from 15% tariffs on Japanese engine imports .
• Inventory levels: Boat channel weeks-on-hand low 30s, targeting ~40 by year-end; field pipelines at historical lows outside COVID; continued reductions concentrated in value segment .

Estimates Context

• Q2 2025 beat: Revenue $1.447B vs $1.257B estimate; as-adjusted EPS $1.16 vs $0.95 estimate* .
• Q1 2025 beat: Revenue $1.222B vs $1.136B estimate; as-adjusted EPS $0.56 vs $0.22 estimate* .
• Q4 2024 beat: Revenue $1.155B vs $1.036B estimate; as-adjusted EPS $0.24 vs $0.17 estimate* .
  Values retrieved from S&P Global.*

Implication: Consensus likely raises Q3 revenue/EPS within guided ranges; consider upward adjustments to FY margins in Propulsion and P&A given product momentum and share gains, while keeping Boat/ Navico cautious due to value segment and tariff dynamics .

Key Takeaways for Investors

• Broad-based beat with strong cash generation is re-rating the quality of earnings; recurring aftermarket and services drove ~60% of adjusted operating earnings, supporting defensibility amidst macro/tariff uncertainty .
• Propulsion momentum continues: high-HP launches, OEM order strength, and potential competitive advantage from Japan tariffs underpin share and margin trajectory into H2 .
• Value boat weakness persists, but mix toward premium/core and disciplined pipeline management mitigate downside; margin recapture actions (model rationalization, cost reductions) in-flight .
• Guidance midpoint held; FCF raised >$400M; expect continued debt reduction and opportunistic buybacks; dividend maintained at $0.43/share .
• Watch July/August retail trends and tariff policy updates; positive momentum could shift narrative from defense to measured growth in H2 .
• Near-term trading: momentum long Propulsion/aftermarket exposure; cautious on value-heavy boat brands; catalysts include AI, autonomous docking, and continued share gains .
• Medium-term thesis: vertically integrated U.S. manufacturing and technology differentiation position BC favorably in a persistent tariff regime; sustained cash conversion supports buybacks/deleveraging .