This Boatmaker Saw Profits Jump by 44% Last Quarter. Is the Stock a Buy?

 The shipbuilder saw a jump of 44% last quarter. Is the stock a buy?

After strong sales last quarter, Marine Products Corporation (NYSE: MPX ) is looking to maintain its current momentum for the rest of the year. This long-term designer, manufacturer and distributor of premium branded recreational and sport fishing boats has been looking to diversify its offering and strengthen its dealer network. The Atlanta-based company posted second-quarter revenue of $116.2 million, up 21%. for the same period last year. According to CEO Ben Palmer, Marine Products' ability to deliver more completed boats to its 206 domestic and 92 international independent dealers has helped "meet the inventory needs of our dealers during the retail selling season."

Improvements in Marine Products' supply chain have strengthened the company's ability to complete and ship "a favorable mix of vessels to meet merchant demand," said CFO Michael Schmit. During the Q2 earnings call late last month, he explained how unit sales rose 11% on 10% higher selling prices and gross profit rose 25% over last year's Q2 result to $28.7 million. Net income reached a most impressive $14.3 million, up 44% year-on-year.

International sales, which make up about 7% of Marine Products' total sales, were up 4% from Q2 last year. Marine Products manufactures its boats under the Chaparral and Robalo brands, which include a range of luxury recreational and sport fishing boats sold worldwide. With its 92 dealers outside the US accounting for more than 30% of its total dealers, the company has plenty of room to grow its international market share.

Supply chain issues persist

While operational efficiencies and a more favorable model mix helped boost sales last quarter, profitability remained relatively stagnant. Gross margin for Q2 ended at 24.7%, a slight improvement from last year's 24% in the same period.

Part of the blame was higher selling, general and administrative expenses, which rose 23% to $12.2 million from last year. That's a slightly higher percentage of net sales than in Q2 2022. Schmit explained that the increase was expected due to better sales and related commissions, incentives and warranty costs. In addition to dealers having a better mix of boats to sell, MPC price increases increased due to higher material and component costs last quarter.

Supply chain and logistics issues also challenged Marine Products last quarter, as Palmer said it remains difficult to procure some "critical components" on time. However, he noted an improvement in the company's supply line over previous quarters and how the company was able to ship more units than it produced. As a result, Palmer boasted a lower inventory balance and a "strong cash balance" moving into the third quarter.

With their inventory levels now at the low end of their historical range, dealers can meet current demand and place orders for 2024 models. In the company's Q2 earnings report, Palmer said, “Dealer demand indicators continue to be positive if it's the upcoming model year," while hinting at consumer concerns about increased interest rates and "the possibility of an economic slowdown."

During the earnings call, Palmer confirmed that "our market share remains strong" and highlighted how Chaparral's market share has reached the top spot in its category. The recently launched Marine Products 2024 range has been well received by retailers so far. It is designed to attract both customers and production efficiency. With "some of the healthiest inventory and backlog in our industry," Palmer and his team are "prepared for any market conditions that arise over the next few months."

Are shares of Marine Products a buy?

Schmit explained that the cash balance of $66.2 million at the end of the second quarter — $3.6 million higher than in the first quarter of this year — was the result of "profitable operating results and reduced working capital requirements, partially offset by recent capital expenditures ". If the company can sustain the course, I expect better returns along with better margins.

Marine Products also declared a regular quarterly cash dividend of $0.14 per share, payable on September 11. After hitting a relative high of $17.73 last month, the stock has since fallen roughly 10% to its current price. Based on the company's recent successes and sentiment, I say buy Marine Products stock for a long-term hold.

When our team of analysts has a stock tip, it can pay to listen. After all, the Motley Fool Stock Advisor newsletter they've been running for over a decade has tripled the market. They just revealed what they believe are the ten best stocks for investors to buy right now... and Marine Products wasn't one of them. from them! That's right - he thinks these 10 stocks are an even better buy.

In the world of investing, nothing draws attention like a significant jump in a company's profits. The shipbuilder posted a remarkable 44% jump in profits last quarter, which has sparked investor interest. But the big question on everyone's mind is whether this impressive performance will translate into a promising investment opportunity. In this article, we'll analyze the factors behind the earnings growth, evaluate the shipbuilder's growth potential, and determine whether the stock is a buy.

Remarkable rise in shipbuilder's Q2 profit

The shipbuilder in question reported a staggering 44% increase in profits over the last quarter. This remarkable growth has put the company in the spotlight and attracted both experienced investors and newcomers looking to capitalize on this success. The increase in profits can be attributed to several key factors such as increased demand for leisure activities, successful cost management and strategic market positioning.

 Riding the wave of recreational demand

As the world continues to recover from the pandemic, people are looking for safe and fun recreational activities. Boating has become one of the best options for outdoor entertainment, leading to an increase in demand for boats and related accessories. The shipbuilder's ability to capitalize on this trend has undoubtedly contributed to its robust profit growth.

Excellent cost management

Effective cost management is essential to the success of any company and the shipbuilder has demonstrated mastery in this regard. By streamlining production processes, optimizing supply chains and implementing effective resource allocation, the company managed to keep costs under control while expanding its market share. This cost-conscious approach directly impacted the bottom line, leading to higher profits.

A decisive element of the ship manufacturer's success story is its strategic position on the market. By identifying and targeting niche markets, the company has been able to deliver products that meet specific customer needs. This approach not only increases customer satisfaction, but also increases the company's competitive advantage, which ultimately leads to profit growth.

Is the stock a buy?

While the shipbuilder's recent performance is undoubtedly impressive, investors need to consider several factors before deciding to buy the stock. Key elements to evaluate include the company's long-term growth strategy, its competitive position within the industry, potential challenges it may face, and its valuation relative to revenue and industry peers.

The shipbuilder's extraordinary 44% profit surge in the latest quarter has caught the attention of investors and sparked debate over whether the stock is a buy. By capitalizing on the growing demand for recreational activities, effective cost management and strategic positioning, the company has achieved remarkable success in the market. However, investors must do thorough research and consider various factors before making an investment decision. If the shipbuilder can maintain its growth trajectory and manage potential challenges, it could be a really attractive investment opportunity.