BRP expecting ‘solid’ results in fiscal Q2, analyst reports

When BRP reports its fiscal second quarter earnings on Sept. 12, RBC Capital Markets reports “we anticipate solid top-line growth, although a number of previously disclosed factors will pressure near-term margins,” according to a research note provided to Powersports Business by RBC Capital Markets analyst John Kempf.

“We expect continued growth for the full year, driven by product launches, share gains, and margin improvement. On modestly higher earnings and target multiples, our price target increases to $32 from $29,” Kempf writes.

Kempf notes that BRP “management has made it clear on prior calls that earnings are expected to be down Y/Y in FQ2/14 for a number of reasons: costs associated with the move of Sea-Doo production to Mexico, a normalization of incentive spending (vs. unusually low levels last year), increased R&D expenses, and IPO related costs. As many of these are temporary issues, we expect margins and earnings to return to Y/Y growth in FQ3/14.”

With the BRP semi-annual dealer meeting set for Sept. 15-16 in Orlando, Kempf adds that “we expect new product announcements across a number of product areas. Perhaps most closely watched will be the SSV segment, where we may see competitive response to Polaris’ recent offerings in the high-end performance and utility segments.”

Kempf also notes that “BRP targets 200-300 new powersports dealers in North America (from approximately 1,000), primarily in the under-served US South and Southwest.”

RBC Capital Markets rates the BRP stock, traded on the Toronto Stock Exchange, as Outperform.

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