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‘We are globally outpacing the industry,’ BRP says as shares soar

- david dias BRP Inc. Financial Post

Shares of shot up six 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 allterrain 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 and CEO José Boisjoli in a conference call.

Boisjoli highlighte­d the success of BRP’s two-seaters, introduced more than two years ago and now a strong contributo­r to earnings growth. “Our side-byside business is firing on all cylinders,” he said. “There is strong demand for our line-up, and we are ramping up our production capacity to meet increased demand.”

As part of that rampup, 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 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. Today, with a market capitaliza­tion of $5.89 billion, the company is now almost half the size of its former parent.

Indeed, the firm’s biggest problem for the moment may be meeting customer demand, as Farley noted on the conference call. Currently, BRP dealers have to wait about a month for certain products.

Boisjoli pointed out that, while the backlog issue remains, the company’s Mexican expansion should help bring product to market faster. He estimated an overall 25-per-cent increase in production capacity for the year.

“In term of backlog, it’s difficult, but we believe that, on average, we have a month of backlog between when the dealer would like to get the unit and when we can deliver. And we believe that we will be able to catch up on the back end of H2.”

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