BRP Inc is an attractive stock for analysts at Stifel GMP after the company’s fiscal fourth quarter results surpassed expectations.
Stifel reiterated its ‘Buy’ rating for the Quebec-based powersports vehicle producer and upped its price target to $150 from $140 in a note published Tuesday.
“Over the last three years, BRP's EPS has more than tripled driven by rapid market share gains and structural improvement in the company's margins profile, an impressive performance,” analysts said.
“In our view, BRP's strong track record, having reached or exceeded its initial guidance nine years in a row, gives us confidence in management's ability to achieve its target.”
BRP reported EPS of $3.85, up 28% year-over-year, and ahead of Stifel’s expectations of $3.65. Powersports retail sales increased 19% year-over-year compared to the single-digit declines in the industry at large.
That overall sector weakness isn’t lost on the analysts.
“FY24 guidance suggests continued growth, but macroeconomic headwinds remain top of mind for investors,” analysts said.
“Current valuation at 7.5x forward EPS, 40% below historical levels, creates a buffer for a potential industry slowdown and offers investors with a long-term horizon a good entry point into a high-quality business.”
BRP projects fiscal 2024 revenue to increase from 9% to 12% year-over-year while maintaining its 17% EBITDA margins.
“BRP continues to get traction with new customers as they represent 40% of BRP's total customers right now, up from 20% historically,” analysts said. “Credit availability remains strong, with applications, closure rate and FICO scores all trending above pre-pandemic levels.”
Contact Andrew Kessel at andrew.kessel@proactiveinvestors.com
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