Marine recreation company Brunswick Corporation (BC -0.91%) has been on an impressive run this year. Revenue has been growing more than 25% each quarter, and at the time of this writing, the share price is up 33% year to date compared to the S&P 500's 25%. The company reported its Q3 2021 earnings on Oct. 28. Even with slightly lower year-over-year revenue growth, it's clear the business fundamentals are strong, making Brunswick an under-the-radar stock that investors should be aware of.

Adult on a boat with a child steering it through a large body of water with mountains in the background.

Image source: Getty Images

A year of growth

Brunswick's business benefited from tailwinds during the pandemic, when lockdowns made boating an attractive option for folks looking to get out of the house while remaining socially distant. Beginning with Q3 of 2020, Brunswick's revenue took off and the company posted year-over-year growth of 26%, a pace much higher than before the pandemic. In the quarters since, that growth rate accelerated until falling back to 16% in the most recent quarter. Even with that pullback, there's a lot to like with Brunswick's business.

Solid Q3 results

Brunswick's most recent quarter was impressive. Revenue, operating earnings, and earnings per share were up 16%, 9%, and 8%, respectively. On the surface, these increases may seem modest, but it's important to remember that Brunswick was facing difficult year-over-year comparisons to Q2 of 2020 when the pandemic tailwinds began. Brunswick's two largest segments, propulsion and boats, both saw double-digit sales growth.

However, investors should also be aware that these segments also saw slight declines in operating margin. Management attributed the slip in operating margins to inflation, manufacturing inefficiencies, and spending on growth initiatives. Investors can take solace in the fact that these margin metrics were still up on a two-year basis, which means this is probably a temporary margin dip.

Attracting new and diverse boaters 

Brunswick also has an interesting company tucked into its boat segment called Freedom Boat Club, which is a subscription service that allows its members to access boats and marinas around the world. It also provides a fleet of approximately 4,000 boats that is supplied by Brunswick's other propulsion and parts and accessories segments.

Freedom Boat club now has approximately 47,000 members who can access boats at close to 320 locations globally. In the last quarter, Freedom Boat Club contributed 3% to the boat segment's revenue. This revenue is also higher margin, so the more Freedom Boat Club can expand, the more accretive it will be to the overall margin profile of the business. Freedom Boat Club also attracts a younger, more diverse cohort to boating. Specifically, women make up 35% of members, and the percentage of Hispanic members nearly doubled in 2021. Freedom Boat Club offers an opportunity for those who have an interest in boating to get exposure to the activity without having to spend big money on a boat and the ensuing maintenance expenses. If the overall population of boaters can become more diverse, that broadens Brunswick's future customer base and expands its total addressable market.

Positive outlook for the future

Brunswick also raised its full year 2021 guidance. The company is now guiding for revenue of $5.8 billion and earnings per share of $8.15, which would be a slight 0.9% and 1.9% increase over the original guidance, respectively. Impressively, Brunswick has been able to meet most of its demand despite the supply chain issues that have challenged many businesses. In the Q3 earnings call, management stated they'll be able to meet 95% of their 2021 demand for boat orders. Additionally, demand for boats persists. Current dealer inventory is at an all-time low of 7,400 units. This low inventory shows there's consumer interest in purchasing boats, which is good news for Brunswick.

Unlocking shareholder value

In addition to the impressive growth seen over the past year, Brunswick has also managed expenses and allocated capital in a way that rewards shareholders. The company has bought back $98.7 million worth of shares and paid $73 million in dividend payments.

Despite being under the radar for most investors, Brunswick provides many benefits for shareholders. Consistent growth in its core businesses combined with improving operating margins and profitability, decreasing share count, and a consistent dividend that's currently yielding 1.19% make Brunswick worthy of any portfolio.