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3 Leisure Stocks Standing Strong Amid Industry Struggles
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The Zacks Leisure and Recreation Products industry faces challenges due to high inflation and elevated interest rates. Nevertheless, there is a positive trend in sales of fitness products, driven by growing health and fitness awareness and strong boat sales. Industry participants — which design, market, retail and distribute products for the outdoor and recreation market — are witnessing solid demand. Stocks like Acushnet Holdings Corp. (GOLF - Free Report) , On Holding AG (ONON - Free Report) and Peloton Interactive, Inc. (PTON - Free Report) are likely to benefit from the trend mentioned above.
Industry Description
The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, swimming pools, marine products, golf courses, boat repair and maintenance services and other ancillary services. The services include indoor and outdoor storage, marine, boat rentals and personal watercraft. Some industry participants manufacture outdoor equipment and apparel for climbing, mountaineering, backpacking and skiing. A few companies also provide connected fitness products and subscriptions for multiple household users. Industry players primarily thrive on overall economic growth, which fuels consumer demand for products. The demand — highly dependent on business cycles — is driven by a healthy labor market, rising wages and growing disposable income.
3 Trends Shaping the Future of the Leisure and Recreation Products Industry
High Interest Rates: The prolonged inflation, culminating in the highest U.S. interest rates, hurt the industry. Interest rates are at record-high levels. The Federal Reserve hiked interest rates by 525 basis points since March 2022 in its fight to bring down 40-year high inflation. The annual inflation rate in the United States slowed for a fourth successive month to 2.9% in July 2024, the lowest since March 2021, compared with 3% in June and below forecasts of 3%. However, the figure is still above the Federal Reserve’s target of 2%.
New Boat Sales: New boat sales are likely to have declined in 2023 owing to higher interest rates. For the calendar year 2024, the recreational boating sector is expected to maintain sales volumes of new units consistent with those of 2023, even as it deals with fluctuating interest rates and changes in consumer sentiment. Companies within the recreational marine sector are concentrating on the ongoing introduction of innovative products and plan to feature new technologies at numerous upcoming boat shows nationwide. These innovations include marine engines powered by hydrogen and boats that operate entirely on eco-friendly marine fuels.
Booming Golf Business: The golf industry has been doing exceptionally well in the past couple of years. The demand for golf equipment is rising due to advancements in technology. Innovations such as adjustable hosels, aerodynamic clubhead designs and the use of various materials are enhancing the performance and customization options available to golfers. The game is benefiting from an increase in the participation of young people. Technology is also playing a vital role in reshaping the sport. India and China have become two of the most significant emerging golf markets.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects.
The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #235, which places it in the bottom 6% of more than 250 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.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are losing confidence in this group’s earnings growth potential. Since Dec 31, 2023, the industry's earnings estimates for 2024 have declined 33%.
Before we present a few stocks from the industry that you may want to hold, let’s 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 underperformed the Zacks S&P 500 composite but outperformed its sector in the past year. Stocks in the industry have collectively dropped 2.8% in the past year against the S&P 500’s rise of 27.8%. The Zacks Consumer Discretionary sector has increased 6.8% in the same time frame.
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 26.57X compared with the S&P 500’s 21.66X and the sector’s 17.99X. In the past five years, the industry has traded as high as 44.80X and as low as 13.83X, with the median being at 23.96X, as the charts show.
Forward Price to Earnings Ratio Compared With S&P
3 Leisure & Recreation Products Stocks to Watch
Acushnet Holdings: This Fairhaven, MA-based company designs, develops, manufactures and distributes golf products in the United States, Europe, the Middle East, Africa, Japan and Korea. This Zacks Rank #3 (Hold) company will likely benefit from increased demand for golf balls. The company gains from a healthy order backlog, strong at-once demand and gradually increasing output levels. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company’s sales and earnings in 2024 are expected to witness growth of 3.3% and 2.7% year over year, respectively. The stock has increased 15% in the past year.
Price & Consensus: GOLF
On Holding: The company continues to benefit from heightened brand demand, the introduction of new stores, an expanding footprint in China and ongoing product innovation efforts. ONON consistently introduces new and innovative products, ensuring a continuous stream of fresh offerings to attract customers. It strategically targets male and female demographics, broadening its appeal and maximizing market reach.
The Zacks Rank #3 company’s sales and earnings in the fiscal 2024 are expected to witness growth of 32.1% and 143.6% year over year, respectively. The stock has declined 3.8% in the past year.
Price & Consensus: ONON
Peloton Interactive: The company is benefiting from growth initiatives and strategic partnerships. Additionally, PTON's emphasis on global expansion is likely to have acted positively. Robust subscription revenues are also aiding the company.
The Zacks Rank #3 company’s loss per share in 2024 is expected to be $1.63 compared with $3.64 reported in the prior-year quarter. The stock has declined 6.7% in the past three months.
Price & Consensus: PTON
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3 Leisure Stocks Standing Strong Amid Industry Struggles
The Zacks Leisure and Recreation Products industry faces challenges due to high inflation and elevated interest rates. Nevertheless, there is a positive trend in sales of fitness products, driven by growing health and fitness awareness and strong boat sales. Industry participants — which design, market, retail and distribute products for the outdoor and recreation market — are witnessing solid demand. Stocks like Acushnet Holdings Corp. (GOLF - Free Report) , On Holding AG (ONON - Free Report) and Peloton Interactive, Inc. (PTON - Free Report) are likely to benefit from the trend mentioned above.
Industry Description
The Zacks Leisure and Recreation Products industry comprises companies that provide amusement and recreational products, swimming pools, marine products, golf courses, boat repair and maintenance services and other ancillary services. The services include indoor and outdoor storage, marine, boat rentals and personal watercraft. Some industry participants manufacture outdoor equipment and apparel for climbing, mountaineering, backpacking and skiing. A few companies also provide connected fitness products and subscriptions for multiple household users. Industry players primarily thrive on overall economic growth, which fuels consumer demand for products. The demand — highly dependent on business cycles — is driven by a healthy labor market, rising wages and growing disposable income.
3 Trends Shaping the Future of the Leisure and Recreation Products Industry
High Interest Rates: The prolonged inflation, culminating in the highest U.S. interest rates, hurt the industry. Interest rates are at record-high levels. The Federal Reserve hiked interest rates by 525 basis points since March 2022 in its fight to bring down 40-year high inflation. The annual inflation rate in the United States slowed for a fourth successive month to 2.9% in July 2024, the lowest since March 2021, compared with 3% in June and below forecasts of 3%. However, the figure is still above the Federal Reserve’s target of 2%.
New Boat Sales: New boat sales are likely to have declined in 2023 owing to higher interest rates. For the calendar year 2024, the recreational boating sector is expected to maintain sales volumes of new units consistent with those of 2023, even as it deals with fluctuating interest rates and changes in consumer sentiment. Companies within the recreational marine sector are concentrating on the ongoing introduction of innovative products and plan to feature new technologies at numerous upcoming boat shows nationwide. These innovations include marine engines powered by hydrogen and boats that operate entirely on eco-friendly marine fuels.
Booming Golf Business: The golf industry has been doing exceptionally well in the past couple of years. The demand for golf equipment is rising due to advancements in technology. Innovations such as adjustable hosels, aerodynamic clubhead designs and the use of various materials are enhancing the performance and customization options available to golfers. The game is benefiting from an increase in the participation of young people. Technology is also playing a vital role in reshaping the sport. India and China have become two of the most significant emerging golf markets.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Leisure and Recreation Products industry is grouped within the broader Consumer Discretionary sector.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects.
The Leisure and Recreation Products industry currently carries a Zacks Industry Rank #235, which places it in the bottom 6% of more than 250 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.
The industry’s position in the bottom 50% of the Zacks-ranked industries results from the negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are losing confidence in this group’s earnings growth potential. Since Dec 31, 2023, the industry's earnings estimates for 2024 have declined 33%.
Before we present a few stocks from the industry that you may want to hold, let’s 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 underperformed the Zacks S&P 500 composite but outperformed its sector in the past year. Stocks in the industry have collectively dropped 2.8% in the past year against the S&P 500’s rise of 27.8%. The Zacks Consumer Discretionary sector has increased 6.8% in the same time frame.
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 26.57X compared with the S&P 500’s 21.66X and the sector’s 17.99X. In the past five years, the industry has traded as high as 44.80X and as low as 13.83X, with the median being at 23.96X, as the charts show.
Forward Price to Earnings Ratio Compared With S&P
3 Leisure & Recreation Products Stocks to Watch
Acushnet Holdings: This Fairhaven, MA-based company designs, develops, manufactures and distributes golf products in the United States, Europe, the Middle East, Africa, Japan and Korea. This Zacks Rank #3 (Hold) company will likely benefit from increased demand for golf balls. The company gains from a healthy order backlog, strong at-once demand and gradually increasing output levels. You can see the complete list of today’s Zacks #1 Rank stocks here.
The company’s sales and earnings in 2024 are expected to witness growth of 3.3% and 2.7% year over year, respectively. The stock has increased 15% in the past year.
Price & Consensus: GOLF
On Holding: The company continues to benefit from heightened brand demand, the introduction of new stores, an expanding footprint in China and ongoing product innovation efforts. ONON consistently introduces new and innovative products, ensuring a continuous stream of fresh offerings to attract customers. It strategically targets male and female demographics, broadening its appeal and maximizing market reach.
The Zacks Rank #3 company’s sales and earnings in the fiscal 2024 are expected to witness growth of 32.1% and 143.6% year over year, respectively. The stock has declined 3.8% in the past year.
Price & Consensus: ONON
Peloton Interactive: The company is benefiting from growth initiatives and strategic partnerships. Additionally, PTON's emphasis on global expansion is likely to have acted positively. Robust subscription revenues are also aiding the company.
The Zacks Rank #3 company’s loss per share in 2024 is expected to be $1.63 compared with $3.64 reported in the prior-year quarter. The stock has declined 6.7% in the past three months.
Price & Consensus: PTON
