Powersports vehicle manufacturer BRP (NASDAQ:DOOO) ought to power ahead again when it reports fiscal 2020 third-quarter earnings this week. The owner of the Ski-Doo, Sea-Doo, and Can-Am brands has seen sales in most segments and in most markets perform well, if not exceptionally, allowing it to steal market share from the competition.
With products on the market that tap into the current consumer preference for lower-cost vehicles, there's no reason to suspect that when it issues its financial report on Wednesday, Nov. 27, it won't similarly rev up growth even more.
No hurdle too high
BRP has enjoyed a strong 2019, with sales up 19% year to date. That's helped shares of the powersports vehicle maker surge nearly 80% this year, as both year-round vehicles and seasonal machines continue to exceed expectations.
Even with the high bar BRP set for itself in the coming quarter, it ought to do well. The third quarter is a big sales period for its side-by-side vehicles and its personal watercraft. Last year, sales were up 25% in each segment for the period, which makes for some tough comparables to match. That said, it faced a similar hill in this year's second quarter and was able to climb it relatively easily.
Three and four on the floor
Year-round products such as Can-Am side-by-sides were able to far outpace the industry's growth last quarter. Where rival Polaris Industries (NYSE:PII) saw segment sales grow by around 6%, pretty much matching the market, BRP far exceeded those results and could even top its own benchmark this year.
BRP launched its low-priced three-wheeled Can-Am Ryker last year that sports a starting price of just $8,500, or about half the price of its previous entry model, the Can-Am Spyder F3. Polaris is still trying to figure out how to reverse the sales tailspin its own Slingshot three-wheeled vehicle is suffering, but it might want to start with the $21,000 base price.
The Ryker hit the market just a year ago, and it was the vehicle's introduction that allowed BRP to post segment retail sales growth of 90%, so investors will get to see if the market's appetite for this low-cost three-wheeler has been whetted further. Demand reportedly remains strong as decreasing the price has, according to management, expanded its addressable market by 2.8 times. The leasing option it also offers puts someone behind the wheel for $149 a month, a cheap way to get into the vehicle.
That sinking feeling
On the personal-watercraft front, last quarter it had a later start because of a wet spring, but the summer months may have helped lift demand and sales. Last year the Sea-Doo brand gained a lot of market share in the North American market, its highest ever and it will be looking to build on that.
BRP's other seasonal business, snowmobiles, didn't do well last year, falling by high-teen percentage rates. That was in line with the North American industry, though, so it at least maintained its position in the market. It shipped more snowmobiles to dealers in the second quarter, so investors shouldn't expect to see big numbers this time, but BRP is heading prime sales season.
A big question mark will be the boat business BRP entered with a few significant acquisitions. Sales have been softer than it expected, but it's a business it is still absorbing, learning, and transitioning, so it's not worried there's anything wrong.
Another beat and raise?
Management continues to raise full-year earnings guidance from what it offered at the end of its last fiscal year and now expects BRP to generate earnings of $3.65 to $3.85 Canadian per share, an 18% to 23% year-over-year increase. Wall Street is also looking for a percentage rise in earnings similar to the low-end of BRP's guidance.
Consumers don't have to buy the big discretionary spending items, but BRP continues to convince them to do so in large numbers, even when the competition can't, so investors should expect it to power through any difficulties it might encounter this quarter.