Rough Waters for BRP in Q1?

Despite a weak powersports vehicle market, Canadian manufacturer BRP (NASDAQ: DOOO) is looking for sales to rise across all of its segments in fiscal year 2020 as new product introductions and new acquisitions drive revenue higher.

The vehicle and marine products maker will be reporting its first-quarter earnings on Thursday, May 30, but it expects most of its gains to be weighted to the back half of the year, while a lot of the costs for new projects will be borne during the first two quarters.

Let's take a look at what investors can expect from BRP when it releases its results.

Woman standing next to three-wheeled motorcycle

The three-wheeled Can-Am Ryker has been a strong seller for BRP. Image source: BRP.

Off-road strength

The powersports vehicle maker has been gaining market share in all of the segments in which it competes. It saw 23% growth last year in its year-round vehicle segment that produces its Can-Am-branded ATVs, side-by-sides (SSVs), and three-wheeled motorcycles, though growth was not even.

BRP introduced two new SSV platforms last year and launched a new three-wheeler, the Can-Am Ryker, which it credits with helping to lift vehicle sales in the fourth quarter as well as boosting sales of parts, accessories, and clothing.

The unit is performing better than rival Polaris Industries (NYSE: PII), which is seeing sales of its Slingshot three-wheeled vehicle collapse. Although Polaris is committed to fixing the business and turning sales around, CEO Scott Wine is also keeping it on a short leash, saying if sales didn't improve soon, he'd pull the plug on it.

The Ryker, though, is expected to see its sales momentum carry forward into the first quarter, along with a continued push from SSVs. ATVs are in flux, but where Polaris is facing slowing sales, BRP says it still anticipates sales to grow modestly this year and notes it is taking market share.

A chill over snowmobiles and boats

In seasonal products, which include its Ski-Doo and Lynx snowmobiles and Sea-Doo lineup of personal watercraft vehicles, BRP had a rough winter as snowfalls were inconsistent. Ski-Doo retail sales were down by low single-digit percentages in the fourth quarter as a result, and that's left snowmobile inventories higher than expected.

Overseas, though, sales were much better, as Ski-Doo revenue in Europe was higher, as well as in Russia, because BRP began direct-selling there for the first time and opened a new office. BRP uses the direct distribution model in 21 other countries, including the U.S., Canada, China, Germany, and Japan.

The new marine segment it created after acquiring two boat manufacturers last year could be a big winner for BRP. While its Evinrude engine business was down last quarter and retail sales for Alumacraft Boat were down around 20%, the Manitou pontoon boat maker is up about 50%.

BRP ran into some issues when it acquired Alumnacraft as rival engine maker Yamaha announced it would stop supplying the boats with its engines, apparently since it was now owned by a competitor. That created problems for dealers who carried the boats, some of whom want to stop carrying the brand, but BRP says it isn't concerned as it has Evinrude dealers who will step forward to carry the brand.

BRP acknowledges it will take at least a year to straighten out, but boating remains a growth industry, and once BRP hits calmer waters, Alumnacraft should boost the top and bottom lines. The powersports vehicle maker also added to its boating portfolio earlier this month when it purchased Australia's largest aluminum boat and trailer maker, Telwater.

Choppy waters ahead

BRP has a strong lineup of brands and vehicles across the powersports spectrum, but with offsetting issues in a few businesses that ought to straighten themselves out eventually, the vehicle maker's first quarter might not look as robust as it otherwise would.

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Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Polaris Industries. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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