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Factors Setting the Tone for BRP's (DOOO) Earnings in Q3

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BRP Inc. (DOOO - Free Report) is scheduled to release third-quarter fiscal 2020 results before the opening bell on Nov 27. The Zacks Consensus Estimate for the quarter to be reported is earnings per share of 95 cents on revenues of $1.14 billion.

In the last reported quarter, the Quebec-based company beat the consensus mark by 12.8%, primarily on the back of higher revenues, particularly from Can-Am on-and off-road vehicles. As far as earnings surprises are concerned, the powersports vehicle manufacturer has an excellent record, having outpaced the Zacks Consensus Estimate in each of the last four quarters. This is depicted in the graph below:

BRP Inc. Price and EPS Surprise

 

BRP Inc. Price and EPS Surprise

BRP Inc. price-eps-surprise | BRP Inc. Quote

While investors are anticipating that BRP — whose peers include Polaris Industries Inc. (PII - Free Report) , Halfords Group Plc (HLFDY - Free Report) and Spartan Motors, Inc. (SPAR - Free Report) — will surpass earnings estimates this time around as well, our model does not predict the same.

Trend in Estimate Revision

The Zacks Consensus Estimate for revenues is pegged at $1,145 million, indicating an improvement from $1,065 million recorded in the prior-year quarter. The Zacks Consensus Estimate for fiscal third-quarter earnings has moved south by 3 cents over the past month to 95 cents per share, which suggests growth from 80 cents recorded in the corresponding quarter of the prior year.

Let's delve deeper into factors that are likely to have influenced BRP’s fiscal third-quarter earnings.

Factors to Note

High contribution from BRP’s Powersports segment on the back of robust demand for year-round vehicles and seasonal machines is expected to have driven earnings in the to-be-reported quarter. Year-round vehicles like Can-Am all-terrain vehicles (ATV) and Side-by-Side vehicles (SSV) are anticipated to have revved up the company’s sales in the quarter to be reported. In fact, with the launch of Can-Am Ryker in the market last year, BRP has been witnessing strong retail sales growth. High sales of seasonal products like personal watercraft and the Sea Doo brand are also likely to have aided its earnings.

The firm’s relatively newer boat division of the Marine segment is anticipated to have benefited from the Australian boat maker Telwater’s buyout, which closed on Aug 1. The acquisition helped the company to boost offerings and bolster footprint. This is likely to have boosted BRP’s overall revenues.

While high demand for the firm’s products in North America is expected to reflect on BRP’s results in the quarter to be reported, weakness in certain international markets including China amid macroeconomic headwinds is likely to have limited revenues. Further, the firm is likely to have bore the brunt of high operating expenses due to increasing product launches and rising research and development, and selling, general and administrative costs. The high operating costs are likely to have clipped its profit margins to some extent in third-quarter fiscal 2020.

What Our Model Says

Our proven model does not conclusively predict an earnings beat for BRP this time around. This is because it doesn't have the right combination of the two key ingredients — a positive Earnings ESP and a Zacks Rank #3 (Hold) or higher — for increasing the odds of an earnings beat.

You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is -5.51%. This is because the Zacks Consensus Estimate is pegged 5 cents higher than the Most Accurate Estimate of 90 cents.

Zacks Rank: BRP currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

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