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Here's Why MasterCraft Boat Holdings Stock Sank Today

By Jon Quast - Sep 9, 2020 at 11:33AM

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Its guidance mentions unprecedented demand, but that may be overstating the reality.

What happened

Shares of MasterCraft Boat Holdings (MCFT 1.91%) sank on Wednesday after the company reported results for the fourth quarter of its fiscal 2020. Prior to the earnings release, the stock was trading at 52-week highs, reflecting unduly high investor optimism. But shares were down 20% as of noon EDT today.

MasterCraft beat analyst expectations for Q4, but expectations were low. Revenue was way down, and the company recorded a net loss for the year.

MCFT Chart

MCFT data by YCharts.

So what

MasterCraft's net sales plummeted in Q4. The company only brought in $51.1 million, down 58% year over year. This dragged net sales for the year down 22% to $363 million. There were two reasons for the decline. The company had to temporarily stop production because of the coronavirus pandemic, and it believed its inventory at dealerships was too high pre-pandemic and was trying to bring it down. (MasterCraft now believes inventories are currently down 40% to 50% from last year.)

Lower net sales led to net losses of $2.8 million in Q4 and a whopping $24 million in fiscal 2020. Fortunately for investors, those numbers look worse than they actually are. During the year, it had to write down some goodwill on its NauticStar and Crest brands. The writedowns cost $56 million in noncash charges. 

A rising arrow breaks near the top, resulting in the arrow tip pointing down.

Image source: Getty Images.

Now what

MasterCraft offered guidance for next quarter and the entire upcoming fiscal 2021. Looking at just the full-year guidance, the company expects net sales to grow by a mid-20s percentage year over year. CEO Fred Brightbill attributed this guidance to "historically low dealer inventory levels combined with unprecedented retail demand trends" (emphasis added).

This is not as bullish as it first sounds. Assuming MasterCraft can grow fiscal 2021 net sales by 25%, that's still lower than net sales for fiscal 2019. So the word "unprecedented" might be a bit much.  

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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MasterCraft Boat Holdings, Inc. Stock Quote
MasterCraft Boat Holdings, Inc.
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