On Thursday, Brunswick (NYSE:BC) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Brunswick reported a strong start to 2026 with Q1 net sales increasing by 13% year-over-year, driven by market share gains and strong OEM demand.
The company’s adjusted EPS rose by 25% to $0.70, with robust operating leverage offsetting incremental tariff impacts.
Brunswick continued its disciplined capital allocation strategy, repurchasing $20 million in shares and increasing its dividend for the 14th consecutive year.
The company maintained healthy inventory levels, aligning wholesale with retail demand, and saw improvements in dealer sentiment.
Future outlook was cautiously optimistic with guidance reflecting stable market conditions and potential for further share gains, though geopolitical volatility was noted as a concern.
Full Transcript
OPERATOR
Good morning and welcome to Brunswick Corporation’s first quarter 2026 earnings conference call. All participants will be in a listen only mode until the question and answer period. Today’s meeting will be recorded. If you have any objections, you may disconnect at this time. I would now like to introduce Steven Weiland, Senior Vice President and Deputy CFO, Brunswick Corporation.
Steven Weiland (Senior Vice President and Deputy CFO)
Good morning and thank you for joining us. With me on the call this morning are David Foulke, Brunswick’s Chairman and CEO, and Ryan Gwillim, Brunswick’s CFO. Before we begin with our prepared remarks, I would like to remind everyone that during this call our comments will include certain forward looking statements about future results. Please keep in mind that our actual results could differ materially from these expectations. For details on the factors to consider, please refer to our recent SEC filings and today’s press release. All of these documents are available on our website at brunswick.com during our presentation we will be referring to certain non GAAP financial information. Reconciliations of GAAP to non GAAP financial measures are provided in the appendix to this presentation and the reconciliation sections of the unaudited consolidated financial statements accompanying today’s results. I will now turn the call over
David Foulke (Chairman and CEO)
to Dave, thank you, Steve we delivered an excellent start to the year, building on the market recovery in the second half of 2025 with first quarter results significantly ahead of expectations. Despite the dynamic geopolitical and tariff environment, Global and US Boat retail were approximately flat on a unit basis compared to the relatively strong first quarter of last year and premium sales were up. Q1 was the third consecutive quarter of improved relative retail performance, building confidence in our retail forecast for the year as we move into the core selling season in our largest markets. Strong OEM order patterns drove gains for Mercury Marine and Navico Group, while solid boating participation benefited our recurring revenue, parts and accessories, aftermarket and subscription boating businesses. From an inventory perspective, boat and engine pipelines remain healthy, lean and well aligned with demand. Global boat pipelines are down approximately 2000 units versus last year and flat sequentially versus the end of 2025, reflecting our deliberate actions to closely match wholesale with retail. Our overall net sales of $1.4 billion increased 13% year over year, with growth across all segments driven by continued market share gains, strong OEM demand accelerated new product and technology introductions and disciplined operational execution across the enterprise. Our adjusted earnings per share of $0.70 increased 25% versus last year with strong operating leverage from higher sales, more than offsetting the impacts of the tariffs implemented after the first quarter of last year. We continued to execute our disciplined capital allocation strategy, repurchasing $20 million of shares year to date and delivered our 14th consecutive annual dividend increase, underscoring our commitment to returning capital to shareholders while maintaining a strong balance sheet in our core US Market. Product demand and boating participation remain relatively unaffected by the conflict in the Middle east, although the health of the value consumer remains a focus. We have a relatively small direct exposure to Middle east markets but are monitoring trends in Australia, New Zealand and other more exposed markets as oil supply tightens. Our high exposure to the most insulated markets, particularly the US and Canada, which account for more than 70% of total sales, balanced portfolio Lean channel inventories and operational discipline position us strongly to effectively navigate the volatility. Turning to segment performance for the third consecutive quarter, all segments delivered year over year sales growth, operating margin expanded across the portfolio except for Propulsion which absorbed the majority of first quarter incremental tariffs. The strong performance reflected improving retail and wholesale trends, sustained voter participation and disciplined operational execution across the organization. Propulsion sales increased significantly versus last year with Mercury’s global and US outboard unit orders increasing more than 15% over the prior year period and record Mercury outboard share at recent boat shows including 60% overall, an 80% on the water share at Miami and 70% share at Palm beach signaling the potential for further high horsepower share gains. Overall R12 share remains steady of 47% with year to date retail share up 200 basis points along with strong wholesale share gains. Our accelerated investments in future high horsepower outboard platforms and all new mid range high volume models will reinforce our long term competitive advantage. Healthy boating participation and continued distribution gains drove higher sales and margin year over year in our engine P and a business with Land ‘N’ Sea again increasing US distribution share by 150 basis points. Navico Group delivered revenue growth and margin improvement supported by new product launches and operational improvement actions. We introduced the Simrad NSO4 and B&G Zeus SRX multifunction displays at the Miami Boat show, received an Innovation Award for the Lowrance Active Target 2 XL fishfinder and continued to execute Simrad autocaptive implementation plans with a range of OEM customers. Finally, our boat group segment grew sales and margin as wholesale shipments aligned with stable retail. Boat show revenue increased year over year despite weather impacts of some upper Midwest and northern market events. At the Palm Beach Premium Saltwater Show, Boston Whaler and Sea Ray delivered higher unit sales and a substantial 40% revenue increase versus last year. Freedom Boat Club added four new locations in the quarter, increased member trips by 20%, improved same store sales by 10% and earlier this month completed the acquisition of the largest remaining franchise club in the Freedom Network, which serves the Boston and Cape Cod region. Moving on to external conditions Rate cuts enacted late in 2025 are a continuing tailwind for retail and floor plan financing as we enter the peak selling season. While expectations for incremental rate relief have moderated, our forecast does not rely on additional cuts. Fuel prices have risen recently due to geopolitical events but generally remain within historical bounds and we are not experiencing any clearly discernible direct impact on retail or OEM demand or on boating participation in our largest markets. The tariff environment remains dynamic and Ryan will discuss a specific impact to our guidance later on the call. The tariff on Mercury Marine’s Japanese competitors remains in place, representing a potential structural advantage for Brunswick. Refunds related to previously paid IPA tariffs are not yet factored into our outlook. Current dealer sentiment is improved overall but still cautious, supported by healthy and fresh inventories and lower pre owned boat supply which supports new boat demand. While incentives remain elevated versus historical norms, they improved approximately 100 basis points last year and we are forecasting further modest improvement in 2026. Looking now at industry retail performance, the latest SSI data for March shows US industry main powerboat retail down approximately 5% year to date. Against this backdrop, SSI reported that Brunswick outperformed the industry. Our global and US internal retail unit sales were approximately flat year over year compared with the relatively strong first quarter of 2025 prior to the impact of tariffs with premium and core again outperforming value. From a pipeline standpoint, conditions remain very healthy. Global boat pipelines are down approximately 2,000 units versus last year, but flat sequentially versus the fourth quarter and benefiting from wholesale to retail alignment consistent with our plan. In addition, our global boat order backlog at the end of the first quarter represented 71% of our second quarter wholesale forecast up 6 percentage points from last year, providing improved near term visibility. Turning to engines, US outboard engine industry grew 6% in the first quarter with Mercury retail units up approximately 11%. With a similar dynamic to boats, US outboard pipelines were down approximately 10% versus last year, but flat sequentially versus the fourth quarter reflecting wholesale to retail matching. Overall, the combination of sustained share gains, disciplined pipeline management and improving wholesale to retail alignment gives us confidence in our outlook for 2026 and supports our expectation for a flat to improving market as we enter the peak boating season. Finally, I want to address the impacts of recent oil price volatility which has been a frequent topic in recent investor discussions. From the boat buyer or boater perspective, historically there has not been a correlation between oil price spikes and boat sales or boating participation. A primary driver of this low correlation is that fuel costs represent a relatively small portion of total boat ownership expense because on an annual basis the typical recreational boat only uses about 20% to 30% of the fuel of a comparable passenger vehicle. From a boat group perspective, exposure to oil linked materials is relatively small, representing a combined 2% of total cost of goods sold and with the relevant materials being under long term supply agreements, our scale and sophistication also enable hedging programs for other key commodities such as aluminum, further reducing exposure to spot price volatility. However, aluminum prices do remain elevated. Diesel prices have, however, impacted boats and other transportation costs and we have implemented some surcharges. I’ll now turn the call over to Ryan to discuss our first quarter financial performance and updated guidance.
Ryan Gwillim (CFO)
Thank you Dave and good morning everyone. Brunswick’s outstanding first quarter performance came in ahead of expectations with strong sales and earnings growth versus the first quarter of last year. On a consolidated basis, sales were up 13% reflecting improved wholesale and retail trends, continued market share gains in propulsion and several boat categories, strong OEM demand for propulsion components and electronics, favorable changes in foreign currency exchange rates, pricing actions in each segment commencing in the second half of 2025 and solid boating participation driving aftermarket performance. Adjusted operating earnings were up 15% supported by the increased sales, favorable mix, improved absorption and disciplined cost management, more than offsetting the impact of incremental tariffs implemented after the first quarter of last year. Absent the year over year enterprise impact from incremental tariffs. Adjusted operating leverage was approaching 30%, driving adjusted EPS of $0.70 for the quarter. Free cash flow was negative in the first quarter, consistent with seasonal and historical patterns, reflecting higher production levels and working capital investment ahead of the peak selling season compared to the prior year. Free cash flow was down solely due to reinstated variable compensation paid in the quarter. Moving to our segments, Propulsion delivered a very strong start to the year with sales increasing 17% versus the prior year, driven by an improved market, global share gains and strong OEM demand heading into the selling season. Adjusted operating earnings declined year over year solely due to the planned accelerated investments in product development and incremental tariff impact, which slightly more than offset the benefits of higher sales and improved absorption. Absent the incremental tariffs. Pro forma, adjusted operating leverage for propulsion was north of 20% in the quarter even after accounting for the high single digit million dollars of additional product development spend in the quarter moving to engine parts and accessories. This segment once again delivered growth from its aftermarket high margin recurring revenue portfolio with sales up 14% versus the prior year with significant growth across both products and distribution. Healthy early season boating participation even with the recent increase in fuel prices and continued market share gains in our global distribution business drove growth in the quarter. The higher sales and robust adjusted operating leverage at 27% led to a 24% increase in adjusted operating earnings with a 140 basis point improvement in adjusted operating margin. Navico Group had another great quarter transitioning from stability to growth with sales up 7% over prior year and up across all business lines supported by improving OEM demand, steady aftermarket performance and operational efficiency. More importantly, adjusted operating earnings increased 64% with adjusted operating margin expanding 280 basis points reflecting the early benefits of product portfolio optimization, operational improvements and disciplined cost control actions which more than offset incremental tariffs. We often discuss the inherent operating leverage in this high gross margin business, so it’s fantastic to see 47% adjusted operating leverage in the quarter. As our actions bear fruit, we continue to see encouraging traction from recent product launches including Simrad NSO4 and BNG Zeus SRX and recognition for innovation with Lowrance Active Target 2XL. While there is still work ahead, the results this quarter reinforce our confidence that Navico Group is on a sustainable path towards improved profitability. Finally, our boat segment also had a strong quarter with sales up 6% over prior year driven by higher wholesale shipments, matching stabilized retail conditions, favorable mix and continued momentum in the business acceleration portfolio. Boat growth was led by our aluminum, fish and pontoon brands while Freedom Boat Club continued to deliver strong increases in members and trips and locations. As mentioned earlier, adjusted operating earnings increased 63% and adjusted operating margin expanded 130 basis points reflecting healthy adjusted operating leverage of 25% primarily driven by the higher sales and favorable mix. Dealer pipelines remain very lean with mostly current model year product well positioning the business heading into the prime retail season. Lastly, I’ll discuss our updated outlook for 2026 as we enter the core retail selling season in the U.S. we are encouraged by the stable market conditions and the strength of our first quarter performance. Steady dealer and customer sentiment, exceptionally healthy and lean pipelines, disciplined wholesale to retail alignment and sustained boating participation are sources of confidence as we move through the remainder of 2026. However, while direct sales and operational impacts remain limited, heightened geopolitical volatility has introduced new uncertainties. Earlier, Dave discussed the muted impacts to date caused by fluctuations in interest rates and fuel prices, but we remain cognizant of the potential impact on the health of our consumer, especially outside the US from a prolonged conflict in the Middle East. Finally, the tariff environment remains dynamic and during the quarter IPA tariffs were repealed and replaced with section 122 and more recently section 232 tariffs on steel and aluminum were amended. The net impact of these changes is positive and we now believe our full year incremental net tariff impact will ultimately land near the lower end of our original $35 to $45 million estimate shared at the beginning of the year. Also, as Dave mentioned, refunds related to previously paid IEIPA tariffs are not yet factored into our outlook or recognized in our financial statements. The result is materially unchanged guidance on the sales margin and free cash flow lines, but an increase to adjusted eps guidance to $4 to $4.50 reflecting the lower full year expected incremental net tariff impacts I just discussed, as well as the first quarter overdrive while also factoring in some cautiousness given the current dynamic macroeconomic environment. Overall, we believe our guidance reflects confidence in our operating plan, the resilience of our portfolio and our ability to generate strong financial performance in a flat to slightly up retail environment. I’ll now pass it …
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