BRP fiscal Q3 expected to show 30% growth in UTV sales, analyst says

With BRP set to release its fiscal third quarter earnings on Dec. 12, analyst John Kempf reports that RBC Capital Markets anticipates “solid growth in revenue, margins and earnings, with our forecast inline with consensus. If results are as expected, in particular with a return to growth in Spyder and solid SSV sales, then we anticipate a positive response by investors.”

In a research note provided to Powersports Business, Kempf adds that with “strong sales expected from both snowmobiles and PWCs, we expect the [seasonal products] division to increase sales by 18.6% Y/Y. We continue to expect a strong sales increase in side-by-side vehicles (+30% Y/Y), though dampened by a likely modest decline in ATV sales. Roadster sales (the Can-Am Spyder) will be closely watched after a weaker showing in FQ2 (0% growth last quarter; expect 5%+ in FQ3). The propulsion systems and PAC divisions are each expected to increase revenue by 12-13% on new product introductions.”

Outtakes from the report:

• RBC Capital Markets expects “a strong start to the snowmobile season, with revenue expected to be up ~20% Y/Y. Key competitor Polaris (NYSE: PII) reported Q3/13 wholesale snowmobile revenue increased by 25% Y/Y, despite apparently losing share in seasonal sales. Polaris indicated that their retail sales season to date were down ‘mid single-digit %’ while the industry’s retail sales were up ‘mid-teens %’.

• Kempf also adds that “FQ3 is typically the seasonally weak quarter for Sea-Doo sales. However, with the launch of the low-cost Spark model in International markets, we anticipate a meaningful (25% Y/Y) increase in revenues, though this is off a low base.”

• Kempf goes on to write that BRP “SSV sales are expected to remain strong, increasing ~30% Y/Y. We continue to see strong industry growth, enhanced by BRP’s expanding product portfolio and dealer network. Polaris commented in their Q3/13 earnings release that their off-road vehicle wholesale revenue was up 23% Y/Y. Further, their North American retail sales of off-road vehicles (ATV/SSV) were up ‘low-teens %’ vs. the industry which was up ‘low-double digits %’ as Polaris gained retail share. The growth, as expected, came mainly from the SSV products.”

• Kempf says “Roadster sales were disappointing last quarter (they were flat Y/Y), with management commenting more recently on a change their go to market strategy. While this new campaign has not yet rolled out, management has said that Roadster sales improved in August and September. While datapoints are limited, we forecast revenue to increase a modest 5% Y/Y, though this could prove conservative.”