“BRP (DOO) continues to consistently put up strong financial results that exceed investor expectations,” according to a research note provided to Powersports Business by BMO Capital Markets analyst Gerrick Johnson following BRP’s fiscal Q2 earnings release.
Johnson also reports that with “solid innovation and strong execution, the company is growing market share in most categories it competes in, while benefitting from strong underlying industry demand, particularly in its key markets like off-road, personal watercraft, and three-wheeled motorcycles. We continue to view shares as significantly undervalued, trading at just 10.5x our FY2021 EPS estimate of $4.40.”
Johnson adds that BRP’s “North American powersports unit retail sales grew +14% in the quarter (+9% including Evinrude), ahead of our +10% expectation, and the broader industry which was up mid-single digits percent in the quarter.
“The company's SxS lineup continues to take share, growing retail sales in the high-twenty percent range (industry +HSD%). Ryker, the value-priced three-wheeled motorcycle, continues its strong start, with retail almost doubling in the quarter. The Evinrude outboard business (<5% of company sales) continues to struggle at retail and declined in the low-thirties percent range.
“Retail performance is particularly impressive given the slow, weather-induced start to the quarter. BRP saw retail pick-up in June and July and strong retail trends were noted to have continued into August. North American dealer unit inventory was up +16% year over year, driven by continued strong ORV demand, the introduction of the Ryker.
“BRP raised its FY2020 EPS guidance to $3.65-$3.80, up from previous guidance of $3.55-$3.75. Total revenues are now expected to increase in the range of +10% to +13% ($5.8-$5.9 billion), up from prior guidance of +9% to +13% ($5.7-$5.9 billion).”
The updated sales guidance is comprised of higher Year-Round Product growth and the inclusion of the acquired Telwater boat business offsetting softness elsewhere in its marine portfolio.