Industry Description
The Zacks Leisure and Recreation Products industry comprise companies that provide amusement and recreational products, comprising swimming pools, marine products, golf courses, boat repair and maintenance services and other ancillary services, including indoor and outdoor storage and marine, as well as rental of boats and personal watercraft. Some of the industry participants manufacture outdoor equipment and apparel for climbing, mountaineering, backpacking and skiing. Some companies also provide connected fitness products and subscriptions for multiple household users. The industry players primarily thrive on overall economic growth, which fuels consumer demand for products. In fact, demand, which is highly dependent on business cycles, is driven by a healthy labor market, rising wages and growing disposable income.
4 Trends Shaping the Future of Leisure and Recreation Products Industry
Boating Suppliers Witnessing Robust Demand: New boat sales have increased sharply amid the coronavirus pandemic. In fact, boat sales have been going through the roof since April-end 2020, and some dealers are hard-pressed to supply. Per National Marine Manufacturers Association (NMMA) reports, retail unit sales of new powerboats increased by 12% in 2020, compared with the prior year. More than 310,000 new powerboats were sold in 2020, compared with 178,000 and 286,000 boats sold in the United States in 2010 and 2012, respectively. In fact, boat sales in the United States touched a 13-year high in 2020. In 2021, new powerboat sales surpassed 300,000 units for only the second time in 15 years. Although 2021 new powerboat sales were 4% to 6% below record highs in 2020, it is still 7% above the five-year sales average. The uptrend is likely to continue in 2022. Per NMMA, new boat sales in 2022 are likely to surpass the 2021 figure by as much as 3%. According to the Marine Retailers Association of America, 95% of the boats in the world are made in the United States.
Booming Golf Business: The golf industry has been doing exceptionally well amid the pandemic. Golf has been benefiting from an increase in the participation of young people. Per Golf Datatech and its 2020 National Golf Performance Report, 2020 rounds rose by 13.9%, while equipment sales improved 10.1% in 2020. The uptrend continued in 2021, with rounds played increasing 5.5%. While comparing 2021 to 2019 (pre-pandemic), rounds played increased by nearly 18%. This gives an indication that the industry is performing exceptionally well over the past two years. The golf industry has been gaining from strong participation from millennials. Technology has been playing a vital role in reshaping the sport of golf. Meanwhile, India and China have popped up as two of the largest emerging golf markets.
Economy Recovering: The industry is likely to benefit from the decline in the unemployment rate. In January, the unemployment rate declined to 3.9%. This demonstrates that U.S. unemployment is back down to pre-pandemic levels.
Liquidity a Major Factor Amid Pandemic: Maintaining liquidity has become a herculean task for a number of industry participants in the current scenario. Most of the companies are cutting pay and furloughing employees. The industry participants are suspending share repurchase programs and dividend payouts in an effort to improve liquidity.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects.
The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #69, which places it in the top 28% of more than 248 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks from the industry that you may want to consider, let’s take a look at the industry’s recent stock market performance and valuation picture.
Industry Underperforms the S&P 500
The Zacks Leisure and Recreation Products industry has underperformed the Zacks S&P 500 composite and its sector over the past year. Stocks in this industry have collectively declined 47.4% over the past year against the S&P 500’s rally of 15.9%. Meanwhile, the Zacks Consumer Discretionary sector has slumped 20.4%.
One Year Price Performance
Valuation
On the basis of forward 12-month price-to-earnings, which is a commonly used multiple for valuing leisure products stocks, the industry trades at 21.68X compared with the S&P 500’s 20.1X and the sector’s 30.08X. Over the past five years, the industry has traded as high as 44.8X and as low as 12.36X, with the median being at 16.57X, as the charts show.
Forward Price To Earnings Ratio Compared With S&P
4 Leisure & Recreation Products Stocks to Watch
Academy Sports and Outdoors: Based in Katy, TX, the company, through its subsidiaries, operates as a sporting good as well as outdoor recreational products retailer in the United States. It is benefiting from robust consumer demand across all markets and merchandise divisions, primarily Sports & Recreation. An increase in demand for indoor and outdoor games, bikes, fitness equipment and outdoor cooking bodes well.
In the past six months, shares of this Zacks Rank #2 (Buy) company have surged 35.7%, against the industry’s decline of 48%. The Zacks Consensus Estimate for 2022 has been revised upward by 3.1% in the past 60 days.
Price & Consensus: ASO
OneWater Marine: This Buford, GA-based company operates as a recreational boat retailer in the United States. An increase in the average unit price of new and pre-owned boats augurs well. A rise in service, parts and other sales, and acquisitions might have driven the company’s performance. Emphasis on technological investments and inventory planning tools and good retail demand has been contributing to its performance as well.
Shares of this Zacks Rank #1 company have gained 48.7% in the past year. The Zacks Consensus Estimate for 2022 earnings has been revised upward by 6.3% in the past 30 days.
Price & Consensus: ONEW
MasterCraft Boat: This Vonore, TN-based company, through its subsidiaries, designs, manufactures and markets recreational powerboats. The company is benefiting from robust volumes, higher prices and higher option sales. In 2022, the company anticipates net sales to increase in the range of 25%.
Shares of this Zacks Rank #2 company have appreciated 17.6% in the past six months. The Zacks Consensus Estimate for 2022 earnings has been revised upward by 4.9% in the past 30 days.
Price & Consensus: MCFT
Pool Corp.: Based in Covington, LA, Pool Corp. is the world's largest wholesale distributor of swimming pool supplies, equipment and related products. The company is gaining from the solid performance of the base business, large market presence and strategic expansions through acquisitions. It is benefitting from solid demand across heaters, pumps, filters, lighting, automation and pool remodeling.
Shares of this Zacks Rank #2 company have surged 37.7% in the past year. The Zacks Consensus Estimate for 2022 earnings has been revised upward by 0.7% in the past 30 days.
Price & Consensus: POOL
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