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Shares of Canadian power sports manufacturer BRP (DOO.TO)(DOOO) have erased much of their pandemic-era gains, and continue to fall, as analysts slash price targets for the Ski-Doo and Sea-Doo maker’s stock.
The Quebec-based company cut its full-year earnings guidance for a second time in two quarters last week, when it reported financial results. BRP’s latest forecast calls for earnings per share of between $2.75 and $3.25, down from between $6 and $7. BRP also lowered its revenue estimate for the year to between $7.8 billion and $8 billion, from between $8.6 billion and $8.9 billion.
In its core North American market, BRP says retail sales tumbled 18 per cent year-over-year in the three months ended July 31, outpacing single-digit declines industrywide.
“June-July was very, very soft,” BRP chief executive José Boisjoli told analysts on a post-earnings conference call. “We are operating in an increasingly challenging economic environment.”
Boisjoli says he expects a “correction period” over the next 12 to 18 months as the company attempts to sell excess inventory. At the same time, he notes more competitors are offering discounts to lure consumers stretched by higher living costs.
BRP’s stock hit an all-time high in 2021, as COVID-19 stoked demand for its recreational vehicles and watercraft. Toronto-listed shares fell as much as two per cent on Tuesday, reaching their lowest level since late-2020.
At least five Bay Street analysts have cut their price target in recent days, with several noting BRP’s latest guidance cuts were deeper than they had expected.
“The magnitude was surprising,” BMO Capital Markets analyst Tristan Thomas-Martin wrote in a note to clients in which he lowered his price target to $100 per share from $115.
National Bank analyst Cameron Doerksen called the warnings from BRP “much more significant than anticipated” as he cut his price target to $89 per share from $100.
“While the power sports market was clearly softening, the market was already pricing in a significant downturn for BRP,” he wrote in a note to clients. “The trough earnings for BRP are clearly materially worse than what we were anticipating as a worst-case scenario, but we nevertheless believe [fiscal 2025] will be the trough earnings year.”
RBC Capital Markets analyst Sabahat Khan cut his price target to $99 per share from $108. Scotia Capital analyst Jonathan Goldman cut his price target to $91 from $103, downgrading his outlook to “sector perform.” CIBC Capital Markets analyst Mark Petrie dropped his price target to $92 from $100, while downgrading his rating to “neutral.”
“A second consecutive material reduction to guidance leads to a much more cautious view on recovery in [fiscal 2026],” Petrie wrote in a research note.
Speaking on BRP’s Sept. 6 conference call with stock analysts, Boisjoli said he hopes the Federal Reserve will begin to lower interest rates later this month, making it easier to finance the purchase of a BRP vehicle.
“There are more new entrant customers who finance their product that are refused credit. We hear that more often,” he said. “This will come back when the interest rate goes down.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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