On Friday, Stifel adjusted its financial outlook for MasterCraft Boat Holdings (NASDAQ:MCFT), reducing the price target to $22 from $25. The firm sustained its Buy rating on the stock despite anticipating significant declines for the company's fiscal year-end.
The revised target reflects a challenging quarter, mirroring the downward trends seen during the first nine months of MasterCraft's FY2024. The company is expected to report an AEBITDA loss of $2 million on revenue of $63 million, a 63% decrease year over year.
MasterCraft's performance has been affected by weaker retail sales and a lack of significant dealer inventory replenishment. The ski/wake boat segment, where MasterCraft operates, has faced additional pressure due to the financial distress of Malibu Boat's largest dealer.
This situation has led to increased promotional activities across the category. Despite these headwinds, MasterCraft has a history of outperforming AEBITDA Street estimates in 19 of the last 20 quarters.
The company's revenue breakdown by brand shows MasterCraft down 67% year over year to $42 million, Crest lower by more than 60% to $10 million, and Aviara at $11 million versus $13 million in the previous year.
Preliminary data indicates that retail unit sales for ski/wake and pontoon boats, which comprise 95% of MasterCraft's trailing twelve months wholesale volume, have declined 18% and 9%, respectively, during April and May 2024.
MasterCraft's dealer inventories were described as above optimal levels at the end of the third fiscal quarter, with a higher ratio of non-current to current product than usual. Although there has been some progress in inventory reduction, it's unclear if satisfactory levels will be reached by the end of FY2024. As the market anticipates the company's fiscal year 2025 guidance, there is a possibility of further declines.
Since the reporting of third-quarter results in early May, MasterCraft's stock has decreased by approximately 10%, now trading near multi-year lows. Despite the near-term challenges, Stifel remains optimistic about the company's long-term fundamentals. The date for MasterCraft's FY4Q24 earnings report has yet to be determined, with last year's results announced on August 30th.
In other recent news, MasterCraft Boat Holdings reported a significant decrease in its Q3 2024 results, with net sales falling by 43% to $95.7 million, largely due to a drop in unit sales and increased dealer incentives. Additionally, MasterCraft's gross margin fell to 19.2%, and its adjusted net income decreased from $24.1 million to $6.3 million.
In response to these developments, the company revised its full-year guidance, now expecting net sales between $360 million and $365 million, and adjusted EBITDA between $28 million to $30 million.
As part of its strategic efforts, MasterCraft launched Balise, a luxury pontoon brand, to diversify its product range. Meanwhile, B.Riley revised its price target for MasterCraft, reducing it from $22.00 to $19.00, while maintaining a neutral rating on the stock.
The adjustment follows a review of recent registration data, indicating a downturn, and an anticipation of increased caution by dealers due to economic uncertainties and potential inventory challenges.
InvestingPro Insights
As MasterCraft Boat Holdings (NASDAQ:MCFT) navigates through a turbulent fiscal year, current metrics from InvestingPro provide a mixed yet insightful perspective on the company's financial standing. With a market capitalization of $320.09 million and a low P/E ratio of 8.22, the company appears to be valued attractively in terms of earnings. Additionally, the P/E ratio has seen a slight decrease to 7.76 over the last twelve months as of Q3 2024, suggesting a potentially undervalued stock in comparison to its earnings.
MasterCraft's balance sheet strength is highlighted by the fact that it holds more cash than debt, according to InvestingPro Tips. This is a reassuring signal for investors considering the company's financial resilience. Moreover, the company's liquid assets exceed its short-term obligations, ensuring adequate coverage for immediate financial needs. Despite analysts anticipating a sales decline and a drop in net income for the current year, MasterCraft's cash flows are sufficient to cover interest payments, and the company is expected to remain profitable.
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