BRP share price up as extra manufacturing capacity boosts earnings
Shares of BRP Inc. shot up 6 per cent on Thursday after the recreational vehicle manufacturer reported blowout first-quarter earnings and raised guidance for the remainder of the year.
The maker of Sea-Doo, Ski-Doo and Can-Am all-terrain vehicles recorded adjusted earnings of $0.52 per share, nearly double the $0.28 estimate from analysts surveyed by Bloomberg, with strong demand across most segments.
“We are globally outpacing the industry in most of our market. And all our projects, whether it is new product or increasing production capacity, are on plan,” said president and CEO José Boisjoli in a morning conference call.
Boisjoli highlighted the success of BRP’s two-seater segment, which was introduced more than two years ago and has been a strong contributor to earnings growth.
“Our side-by-side business is firing on all cylinders,” he said. “There is strong demand for our lineup, and we are ramping up our production capacity to meet increased demand.”
As part of that ramp-up, Boisjoli announced the completion, as of May 1, of a 30-per-cent capacity increase at its Juarez 2 facility in Mexico, enabling the company to raise high-end guidance for EPS growth from 25 per cent to 30 per cent.
A second expansion, enabling a further 30-per-cent increase to capacity, will be complete by May of 2019.
The stock now has eight buy ratings, four holds and no sells, with a consensus price target of $54.73 from analysts surveyed by Bloomberg, below Thursday’s closing price of $60.40 in Toronto.
BRP has seen a number of upgrades in recent months from the likes of National Bank Financial, RBC Capital Markets, CIBC Capital Markets, BMO Capital Markets and Desjardins Securities.
Last week, Robin Farley at UBS was the latest to join the upgrade parade, raising her price target from $54 to $63. In a research note on Thursday, Farley reiterated her target and noted that strong demand has led the company to raise guidance up across nearly all segments.
BRP debuted on public markets in 2013, after the former recreational products division at Bombardier Inc. was spun out. Since then, annual sales have risen 40 per cent and shares are up over 140 per cent.