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  5. DOO: Your comments on third quarter results? [BRP Inc. Subordinate Voting Shares]
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Q: Your comments on third quarter results?
Asked by Rick on November 30, 2023
5i Research Answer:

EPS of $3.06 missed expectations of $3.08 and revenues of $2.47B missed estimates of $2.66B. This was the first earnings miss for DOO in roughly five years. Sales declined by 8.9%, its EBITDA drewdown by 8.8%, and EPS declined by 15.9%. The majority of its sales decrease is due to lower volumes of its PWC, 3WV, SSV, and Sea-Doo Pontoon sales. The company is noticing softening demand, particularly in international markets. Its retail sales growth resulted in market share gains in the North American Powersports industry, but management revised full-year guidance down to an EPS range of $11.10 to $11.35 from a prior range of $12.35 to $12.85. Total sales guidance is now calling for an increase of 4% to 5% vs. a previous 7% to 10%. 

Its gross profit margins increased slightly for the quarter to 25.4% from 24.2% for the same period in the prior year. Operational-wise, the company has managed its business fairly well given the challenging environment, but its sales and profits decline are indicative of slowing demand, particularly in the international markets. We feel this make sense, given the continued tightness in financial conditions and weakening global growth. This was not a great quarter for the company, but it continues to have a strong balance sheet and has announced the renewal of its buyback program, where it can purchase up to 10% of its shares beginning in December. It trades at a cheap valuation of 6.4X forward earnings now, but given the results, we would prefer to see how its buyback program progresses and indications on future quarters.