On Monday, BMO Capital Markets maintained its Outperform rating on BRP (NASDAQ:DOOO) Inc. (DOO:CN) (NASDAQ: DOOO), with a steady stock price target of Cdn$115.00. The firm acknowledged that BRP's first quarter results for fiscal year 2025 met expectations, but noted that the company has reduced its guidance for the second quarter and the full year. This revision is attributed to the cautious stance of BRP's dealer network and a slowdown in retail demand for Seasonal Products and Marine.
BRP's decision to lower its forecasts is seen as a strategic move to decrease inventory levels in anticipation of fiscal year 2026. BMO Capital Markets believes that BRP's ongoing market share gains in the Off-Road Vehicle (ORV) segment and a projected earnings per share (EPS) in the $9.00 range for FY26—despite being below current market expectations—provide sufficient support for the stock during an unpredictable fiscal year 2025.
The analyst from BMO Capital Markets pointed out that the company's proactive measures in adjusting channel inventory are aimed at positioning BRP more favorably for the upcoming fiscal year. While the guidance cut may seem concerning, the firm views it as a necessary step for BRP to navigate through the current retail challenges and emerge stronger in the following year.
Despite the reduced outlook for the near term, the analyst's reiteration of the Outperform rating indicates confidence in BRP's fundamental strength and its ability to continue capturing market share in its industry. The stock price target of Cdn$115.00 remains unchanged, suggesting that the firm believes the company's stock will perform well over time.
In summary, while BRP faces headwinds in the short term, the actions taken to manage inventory and expectations for FY26 are seen as positive steps by BMO Capital Markets. The Outperform rating and price target for BRP shares reflect a belief in the company's resilience and potential for future growth.
InvestingPro Insights
For investors looking deeper into BRP Inc .'s financial health, the latest data from InvestingPro shows a company that's maintaining a strong balance sheet despite recent market challenges. With a market capitalization of $4.73 billion and a trailing Price/Earnings (P/E) ratio of 9.03, BRP appears to be valued reasonably in the market.
Notably, the company has been able to maintain dividend payments for 8 consecutive years, with a notable dividend growth of 28.11% over the last twelve months as of Q4 2024, showcasing its commitment to shareholder returns.
One of the key InvestingPro Tips that stands out is BRP's aggressive share repurchase program, which could signal management's confidence in the company's intrinsic value. Additionally, the Relative Strength Index (RSI) suggests that the stock is currently in oversold territory, which might appeal to value-oriented investors looking for entry points.
While the company has faced a price decline over the past week, with a 1-week total return of -6.51%, the InvestingPro Fair Value estimate stands at $84.09, higher than the previous close price of $62.5. This discrepancy may indicate potential upside for investors willing to weather the current volatility. For those interested in further analysis, InvestingPro offers additional tips on BRP Inc., which can be accessed with the use of the promotional code PRONEWS24 to get an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
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