BMO’s Johnson expects BRP to have 14 percent UTV growth
Prior to Q4 2017 earnings calls that were scheduled after our press deadline, BMO Capital Markets analyst Gerrick Johnson provided us with a research note that included his earnings forecast for the following publically traded companies.
BRP — “BRP’s FY4Q18 does not end until January 31, and the company likely will not report results until March. For the quarter, we expect net sales to decline by 2.6 percent to $1.27 billion, from $1.31 billion in FY4Q17. The Street consensus is for sales to decline to $1.24 billion (minus-5%) and implied FY4Q18 guidance is for sales to decline 8.2 percent to minus-1.8 percent.
“Our forecast for a sales and earnings decline stems from a normalization of the company’s snowmobile shipping patterns. Last year, the ramp of production for the company’s new REV4 platform pushed snowmobile shipments from FY3Q17 into FY4Q17. Accordingly, we expect snowmobile shipments in the quarter will decline 23 percent on a year-over-year basis. Excluding snowmobiles, we expect sales to grow 5 percent in the quarter YOY.
“We expect sales growth of plus-4.7 percent in Year Round Products, comprised of 14 percent growth in side-by-sides, flat ATV sales, and a 3 percent decline in Spyder roadster. Our channel checks continue to indicate that the company’s side-by-side offerings, including the Defender utility side-by-side and the Maverick X3 sport side-by-side, are still selling well at retail with the company experiencing gains in both distribution and market share. Furthermore, the company’s newest offerings, such as the Maverick Trail, the rock-crawling Maverick X3 X RC, and the mudding Defender X MR, were shipped in the quarter and have been well-received by dealers.
“As mentioned, we expect snowmobile sales to be down 23 percent. On a retail basis, however, we think demand for the new 850 E-TEC engine and SHOT starter technology remains robust. Given an expected +3.4 percent growth in PWC sales, we expect seasonal products as a whole will decline 15 percent in the quarter.”
Harley-Davidson — “We believe the Street (buy-side included) is looking for U.S. retail sales to be down double-digits percent. Similarly, after further channel checks and analysis of more recent retail registration data, we are revising our retail expectations to minus-8.0 percent (from plus-1.6 percent) as well as our international retail expectations to be down minus-2.3 percent (from minus-1.0 percent).
“Despite the reductions, we think new cruising bikes with the Milwaukee-Eight engine have been well-received, and our early channel checks on the new Softail platform have also been positive.”
Polaris — “At retail, we have been seeing incremental improvement in the company’s ORV demand, more confidence among dealers in agricultural areas, and less brand damage following the company’s recalls than we think investors had feared. However, our most recent survey indicates a slowdown in growth in December. We believe the company’s North American ORV retail units sales grew by 7 percent in the quarter. With the recent strong stock appreciation, we think investors could be expecting even better.
“We expect ORV/Snowmobile sales will grow 0.7 percent to $961 million, motorcycles will decline 17.2 percent to $94 million (Victory and Slingshot offsetting growth in Indian), and Global Adjacencies will increase 12.3 percent to $111 million. We expect the company’s new aftermarket segment to grow to $225 million, up from $51 million in 4Q16, owing to incremental revenue from Transamerican Auto Parts.”
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