Key Morningstar Metrics for BRP
- : C$106.00Fair Value Estimate
- : ★★★★Morningstar Rating
- : WideMorningstar Economic Moat Rating
- : HighMorningstar Uncertainty Rating
What We Thought of BRP’s Earnings
BRP’s DOO first quarter included sales that rose 29.5% to USD 2.4 billion, bolstered by year-round sales growth of 31% and seasonal growth of 36%, leading to normalized EPS of USD 1.83 (up from USD 0.47). However, higher tariff expectations led BRP to lower its 2027 EPS outlook to USD 3.00-USD 3.50 from USD 5.50-USD 6.50.
Why it matters: Assuming an absence of tariff policy changes, we think BRP would have been able to raise its 2027 earnings per share outlook by about 10%, supporting our thesis that profit headwinds are not self-inflicted. Updated Section 232 tariffs are now set to cost BRP more than USD 500 million and USD 3.10-USD 3.60 in EPS this year.
- For now, the firm is focused on extracting USD 200 million in costs to mitigate a portion of these higher tariffs via pricing, supply chain optimization, and recalibration of capital spending to preserve profitability.
- Even in the face of these challenges, BRP is gaining market share. Higher product demand and fewer promotions provided a tailwind to North American year-round retail sales, which rose at a mid-single-digit rate, outpacing an industry that increased at a low-single-digit rate.
The bottom line: We plan to lower our C$106 (USD 76) fair value estimate for wide-moat BRP by a mid-single-digit rate as we think efforts to offset higher tariffs will take some time to surface. We still view shares as attractive after a 17% year-to-date decline.
- We think investors have shied away from shares due to concern about discretionary spending. However, demand patterns have not warranted this concern, as evidenced by BRP’s 3% lift to its 2027 sales guidance (at the midpoint), implying mid-single-digit growth for the rest of 2027.
- Longer term, we project around 4% sales growth, implying modest unit and selling price growth and incremental share gains versus low-single-digit industry growth. This should be enough to lever operating margins back above 10% (from below 8% in the past two years).
