Humminbird Technology And SCUBAPRO Integration Will Secure Future Efficiency

Key Takeaways

• Strengthening innovation, particularly in the Humminbird brand, is expected to drive future revenue growth through new technology and product sales.
  
• Strategic supplier acquisition and focus on operational efficiencies aim to enhance profitability, stabilize costs, and protect margins amid trade uncertainties.
  
• Competitive pressures, unfavorable pricing, and inventory challenges are threatening Johnson Outdoors' revenue growth and profitability amidst uncertain market conditions.

Catalysts

Designs, manufactures, and markets seasonal and outdoor recreation products for fishing worldwide.

• Johnson Outdoors' commitment to strengthening its innovation capability, particularly with the launch of new technology in the Humminbird brand, is expected to drive future revenue growth as consumer enthusiasm builds and new product sales materialize.
  
• The strategic acquisition of a long-time supplier for the SCUBAPRO brand not only enhances innovation potential but also provides vertical integration benefits, leading to improved operational efficiencies and potentially increasing net margins.
  
• The company's focus on driving operational and product cost savings, along with managing inventory levels, is expected to enhance profitability, positively impacting net margins.
  
• Investment in a digital commerce Center of Excellence aims to accelerate e-commerce sales, which can lead to increased revenue and improved earnings from higher-margin online sales potential.
  
• Johnson Outdoors is leveraging its U.S.-based manufacturing to mitigate tariff impacts, which could stabilize costs and protect net margins amidst rising geopolitical trade uncertainties.

Johnson Outdoors Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Johnson Outdoors's revenue will grow by 8.3% annually over the next 3 years.
• Analysts are not forecasting that Johnson Outdoors will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Johnson Outdoors's profit margin will increase from -8.1% to the average US Leisure industry of 6.5% in 3 years.
• If Johnson Outdoors's profit margin were to converge on the industry average, you could expect earnings to reach $46.5 million (and earnings per share of $4.65) by about April 2028, up from $-45.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.0x on those 2028 earnings, up from -5.2x today. This future PE is lower than the current PE for the US Leisure industry at 17.4x.
• Analysts expect the number of shares outstanding to grow by 0.15% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.58%, as per the Simply Wall St company report.

Johnson Outdoors Future Earnings Per Share Growth

Risks

• The ongoing cautious retail and trade channel environment, coupled with competitive pressures, may continue to negatively impact Johnson Outdoors' revenue growth.
  
• Increased promotional pricing and unfavorable product mix have already affected gross margins, which could lead to lower profitability if these trends persist.
  
• Higher-than-normal inventory levels, despite a reduction from the previous year, could result in additional carrying costs or necessary discounting, impacting net margins.
  
• The dynamic and uncertain situation with new tariffs presents a risk to cost structures due to potential price increases on imported components, which could further strain earnings.
  
• The challenging comparison of sales results due to the previous Minn Kota Quest trolling motor line load-in could obscure real growth indicators, potentially impacting revenue assessments.

Valuation

• The analysts have a consensus price target of $50.0 for Johnson Outdoors based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $714.3 million, earnings will come to $46.5 million, and it would be trading on a PE ratio of 13.0x, assuming you use a discount rate of 6.6%.
  
• Given the current share price of $23.38, the analyst price target of $50.0 is 53.2% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.