BMO Capital Markets analyst Gerrick Johnson attended a BRP analyst event in Melbourne, Florida, on Tuesday, where the company unveiled its new five-year plan.
In a research note titled “The Next Five Years to Be Similar to the Last,” following the BRP event, Johnson provides PSB readers with takeaways from the meeting.
“Yesterday, we attended BRP’s (DOO) analyst event in Melbourne, FL, where the company unveiled its new five-year plan. The target is for annual revenue growth of 10% to $9.5 billion and 15% annual Normalized EPS growth to $7.50 by FY25. This is to be achieved by growing its Can-Am business to $5 billion (+80%), doubling marine revenues to $1 billion, generating $800 million from other growth opportunities, and achieving $300 million in "lean value".
“In April 2015, when DOO set its last five-year plan, the targets were similar: compound annual growth rates of 10% for revenue and 15% for normalized EPS. At the time these goals seemed ambitious. However, DOO is on its way to achieving them a year ahead of schedule. This should give investors confidence in the company achieving its new set of targets. But the difference this time is the company will attempt to grow off a larger base.
“To achieve $5 billion in Can-Am revenue DOO anticipates doubling SSV market share in five years, which should be achievable with a growing installed base, broader distribution, and retail momentum. The potential weak link in achieving this goal is the expected doubling of revenues in DOO's three-wheeled vehicle business. The company has recently had success with its value-priced Ryker. However, it is unclear yet if the sub-$10,000 vehicle, in its first year, merely captured pent-up demand from Spyder fans looking for a less-expensive vehicle, or if its success is the beginning of a longer-term trend.
“Management appears confident in its marine strategy following the acquisitions of the Alumcraft, Manitou, and Telwater boat businesses. Central to the strategy is "project ghost", a new outboard propulsion system that will somehow sit under the boat deck. Technological specs were not shared, leaving us to guess how it would work. DOO also revealed "project M", which is a value pontoon project it hopes will have a similar effect that its Spark had on the personal watercraft industry.
“Other growth opportunities were not fully fleshed out, though DOO expects one or more of its electric concept vehicles to contribute revenues over time. The company expects to achieve these results without acquisitions or share buybacks. Any such actions would be incremental.”