Shares in recreational boat, engine, and parts manufacturer Brunswick (NYSE:BC) fell 33.5% in March, according to data provided by S&P Global Market Intelligence. It's no surprise that the fall comes as a consequence of the COVID-19 pandemic, and unfortunately it has hit the company on a number of levels.
Initially, Brunswick felt the effects primarily because boating and recreational marine activity is a social activity, something being discouraged in the current environment.
Moreover, Brunswick has already announced it will suspend production at certain of its propulsion and boat operations over the next few weeks to protect the health and safety of its workers and "better balance production levels with some projected near-term global market weakness," according to a press release.
It gets worse, because there are secondary effects, too. For example, Brunswick's end demand is based on older people spending discretionary income on leisure activity. This could be an issue if there are substantial job losses in the U.S. and/or asset price declines -- specifically, house prices in states like Florida.
The threat from COVID-19 could affect Brunswick over an extended period. That said, if the pandemic is contained (as it surely will be), and the economy starts to normalize, then history suggests individuals will go back to their daily routines.
If so, Brunswick is a very attractive stock to consider investing in. It has a dominant market share in outboard motors and generates nearly half of its earnings from aftermarket parts, meaning it should be able to generate good earnings and cash flow over time as it services its existing customers. Also, management previously expected to increase its margin over time as it focuses on the marine leisure market.
It's impossible to predict the duration and depth of the pandemic or its impact on the economy (many companies are canceling their guidance as a consequence), and Brunswick is particularly affected. It's probably going to get worse before it gets better, so all investors can do is wait and watch, and hope that the pandemic subsides as quickly as possible.