OEM’s side-by-side Q4 North America retail sales rise of 79% expected: analyst

With the manufacturer reporting its fiscal fourth quarter 2022 results on Friday, BMO Capital Markets analyst Gerrick Johnson has provided Powersports Business with a research note related to BRP’s expected results.

“We expect BRP (DOO) to report FY4Q22 normalized EPS of $2.36, up +30% from $1.82 in FY4Q21. Our estimate is below the Street estimate of $2.54 (+40%). Implied FY4Q22 guidance is for EPS of $2.09-2.84 (+15% to +56%). DOO had previously commented that FY2023 would post double-digit revenue and EPS growth off the midpoint of its 2022 guidance range. With growing macro-economic uncertainty, we think investors have viewed this prior guidance skeptically. We expect investors to be positively surprised when the company reiterates this guidance.

“Key Points

“We expect FY4Q22 sales to grow +25% to $2.27 billion, just below consensus of $2.3 billion (+27%). Implied FY4Q22 guidance is for revenue of $2.14-2.44 billion (+18% to +34%).

“We expect FY4Q22 North American powersports retail sales to decline about -15% y/y. We think retail demand has remained solid, albeit slower than 4Q21 owing to a severe lack of dealer inventory. We note in our 4Q21 BMO/Powersports Dealer Survey open-ended responses indicate dealer confidence in demand for outdoor recreational products, but also increasing concern about the economy, inflation, and discretionary incomes.

“We expect 4Q revenue to increase +25% in Year-Round Products, with SSV up +79% owing to expanded capacity from the first wave of the Juarez 3 facility build-out. We expect ATV sales to be down -40%, as the company prioritizes production of higher-margin/revenue SSVs. We plan Roadster sales to be up +9%.

“We expect that Seasonal Product revenues grew +34% in the quarter on a +51% increase in PWC sales and +25% growth in snowmobile sales. We project the company’s marine segment will increase +14% (boats flat and marine PAC up +65%).

“We expect the gross margin to contract -120 bps to 26.5%, owing to rising input, labor, and logistics costs more than offsetting higher production levels, overhead absorption, price increases, and lower promotions.

“Management had previously commented that FY2023 would post double-digit revenue and EPS growth off the midpoint of its 2022 guidance range, i.e. at least $8.35 billion and $10.30, respectively.

“We are currently modeling FY2023 revenue of $9.3 billion (+23%), EPS of $11.60 (+25%), and normalized EBITDA of $1.63 billion (+12%). The Street revenue estimate is $8.8 billion (+16%), EPS is $10.47 (+13%), and normalized EBITDA is $1.56 billion (+7%).”