BRP INC. (DOO-T)

DOO reported EPS of 61c, beating estimates of 44c but declining from prior quarterly levels of $3.21. Revenue came in at $1.84B missing estimates of $1.89B and declining 34% year-over-year. Lower revenues were attributed to lower volume across most product lines as it continued to reduce its network inventory levels. Operating margins also dropped 470 basis points as a result of the lower volumes. DOO also cut its FY2025 guidace significantly. Revenue of C$7.8B-C$8B is expected from C$8.6B-C$8.9B, and normalized EPS of C$2.75-C$3.25 is expected from C$6.00-C$7.00. The results were of course not good and highlight the softening industry demand and transitional period the company is entering, as described in our recent report.
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We didn't have a winter last year. People bought ski-doos during the pandemic, but are travelling now. He still likes it. It's cheap and there's less competition now. He sold it, but will re-enter it.

It is picking up market share in recreational products. It is cheap at 8X operating cash flow. The consumer may be slowing down

Saw a nice little bounce. The mild winter didn't help their snowmobile business, a sector where they are gaining market share. Inventory has risen. A great summer for boats would help, but he's overall cautious about this.

Trades at 8x PE vs. peers at 12x. They mostly beat their last quarter, generate free cash, take more market share and enjoy robust demand for snowmobiles. A caveat is that in a downturn, discretionary costs like this will be cut.

It held up well during the downturn and is therefore resilient. It has rallied and maintained at these higher levels. The consumer goods sector and leisure products are doing well.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Strong player in sports vehicle market. Managed costs very well during COVID. Main risk is reduced consumer spending. Shares are fairly priced with upside potential.

3-5 year hold? An innovative company that captivates its customers. On a 12-month trailing basis is earning 2x what its normalized earnings power is. They sell jet skis and other expensive toys that people bought during the pandemic, and you won't need to replace those anytime soon. It was a 6-bagger during Covid, but has since come off 28%. This will likely grind lower lower before it resumes its uptrend. Still not cheap and expectations are still too high. If you hold this for 3-5 years it's probably okay, but not for him.