After being hit on both the supply and demand sides of their business, BRP (DOO) is taking aggressive action that includes an end to engine production for the Evinrude brand alongside many staffing cost control measures. But the worst might be over soon.
The firm says a tumble in Spring sales will see losses of about 40% in the second quarter, along with an additional 10-20% in the second half of the year. Given that we see the company losing around 25% for the fiscal year, it could be that they’re getting most of the pain over with before the summer starts.
Senior equity analyst Jaime Katz says that impacts from the pandemic appear transitory for the company. And social distancing norms in the future could encourage outdoor activities, that may involve a motor… especially as the warm weather starts.
We’re maintaining our fair value estimate of 47 dollars for the company. Although we think that their goals for 2025 are unattainable, especially after the crisis, we see them at least keeping their leading market position. After being in the business for more than 60 years, having deep dealer relationships and 4,000 global locations, BRP brings time-tested Canadian brand equity that’s hard to beat.
For Morningstar, I’m Andrew Willis.
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