BMO Capital Markets analyst Gerrick Johnson, who partners with Powersports Business for the largest dealer survey of its kind every quarter, shares his thoughts on BRP’s fiscal Q2 2019 results.
“BRP (DOO) FY2Q19 results beat expectations across the board and by a wide margin with strong sales and profitability growth and robust retail performance in all segments,” Johnson reports in a research note provided to Powersports Business. “Guidance was lifted for FY2019 and DOO now expects to hit its FY2021 EPS target a year ahead of schedule. With some of the best products and execution in the leisure space DOO remains a top pick — despite its lofty 18x forward PE and elevated debt level. We are lifting our earnings estimates and price target to $76 from $70.
DOO reported normalized FY2Q19 (ended July) EPS of $0.66, which was well ahead of our $0.27 expectation, Street consensus of $0.30, and $0.20 in FY2Q18.
DOO raised its FY2019 guidance and now expects EPS of $2.94-$3.06 ($3.00 midpoint), up from $2.82-$2.94 ($2.88 midpoint). Sales guidance was also raised to +12% to +16% ($4.99 to $5.16 billion), vs a prior expectation of +6% to +10% ($4.72 to $4.9 billion).
DOO now expects to achieve at least $6 billion in revenue and $3.50 in normalized EPS in FY2020 – one year ahead of schedule.
2Q Revenue increased +18% to $1.21 billion, ahead of our +6% estimate ($1.09 billion) and the Street’s +7% estimate ($1.1 billion). Growth was broad-based with Year-Round up +26% (ATV, SSV, Spyder), Seasonal up +21% (Sea-Doo, Ski-Doo), and Powersports PAC and OEM engines (Rotax) up +3%. DOO reported flat sales in its new Marine segment (Evinrude, Alumacraft), which benefitted from the addition of a small month of Alumacraft boat sales.
Normalized EBITDA was $144 million (+72% yoy), and easily beat our $102 million estimate and consensus of $100 million.
North American powersport unit retail sales increased +16% in the quarter, lead by a low thirties percent increase in SSVs. All other categories were up as well; PWC up mid teens, ATV up mid single digits, and even the lagging Spyder was up low teens.
The company did not sound like it was done building out its Marine division, alluding to more boat deals to be done. Accretion to FY2019 from the recent acquisitions of Alumacraft and Manitou is currently expected to be a naormalized $0.10 per share, a 3% increase to EPS.”
Powersports Business will once again be joining dealers at the Can-Am and Sea-Doo Club BRP next week in Denver.