There's a reason why shipbuilders subdivide their creations with bulkheads: to ensure that a hull breach at one location doesn't flood the whole ship. But as the sinking of the Titanic showed, sometimes all the subdivision in the world still can't save Leonardo DiCaprio from drowning.
It's similar in the world of investing. When pleasure-boat retailer MarineMax
Um, what news?
Oh, that's right. I haven't told you that yet, have I? Well, here's a brief rundown. Early Monday morning, MarineMax issued a "fiscal 2007 update" -- a.k.a. an "earnings warning." Citing "increased softness" in the boating industry, CEO William McGill knocked a good 31% off of his firm's previous earnings estimates for this year, predicting same-store sales growth in the mid-single digits and an earnings range that centers on about $1.45 per share.
Although they're not as good as we had been led to believe, those numbers actually don't look too bad. At its current price, they suggest a firm trading at a forward P/E of about 15 -- roughly equal to its projected long-term profits growth.
So why the sell-off? One possibility: MarineMax said it expected same-store sales growth of 14% this first quarter of 2007. To get to mid-single digits over the course of the year, MarineMax's business is going to have to slow down an awful lot. Thus, McGill appears to be saying things will get a lot worse before they get any better. When you consider that this is not at all what McGill was suggesting just a few months ago, I think investors' disappointment is all the more understandable.
For more Foolishness on the industry, read:
- Boat Makers See Shoals
- Marine Products Hard to Sink
- Brunswick Drops Anchor
- Foolish Forecast: Marine Products
Fool contributor Rich Smith does not own shares of any company named above.