On Monday, Citi analysts adjusted their stance on BRP Inc . (TSX:DOO:CN) (NASDAQ: DOOO), downgrading the stock from a Buy to Neutral rating. Concurrently, the price target was revised downward to Cdn$70.00 from the previous Cdn$90.00. According to InvestingPro data, the stock has declined over 30% in the past six months and is currently trading near its 52-week low of $46.84. The revision comes amidst concerns over potential tariffs that could significantly impact the company's profitability.
The analysts expressed concerns about the effects of possible tariffs on powersports companies with substantial exposure to China and Mexico, particularly during a second Trump administration. BRP Inc. , along with others in the industry like PII, could face severe profitability challenges if tariffs are implemented without countermeasures such as price increases, exclusions, or geographic restructuring. InvestingPro analysis indicates the company currently maintains a Fair financial health score, with a strong EBITDA of $731.71 million in the last twelve months.
The report highlights that despite the ongoing discussions about tariffs, companies like BRP (NASDAQ:DOOO) have not yet taken substantial actions to mitigate the potential impacts. The Citi analysts noted that the imposition of tariffs could push profits substantially lower, which has prompted the downgrade of BRP's shares to Neutral.
The downgrade reflects the analysts' view that the burden of proof now rests with BRP to demonstrate how it can navigate the potentially challenging landscape. The situation is described as "quite fluid," indicating that there are still many variables that could affect the outcome for BRP and similar companies in the sector.
The new price target of Cdn$70.00 represents a significant reduction from the previous target, underscoring the analysts' revised expectations for BRP's financial performance in light of the potential tariff-related headwinds. The downgrade and new price target are based on the current assessment of the risks facing BRP and the broader powersports industry.
In other recent news, BRP Inc. has been making noteworthy strides in the market. Following Q3 results, the company's stock price target was revised by DA Davidson from $96 to $88, despite maintaining a Buy rating. This adjustment was influenced by BRP's strong Q3 performance, surpassing earnings expectations and increasing its full-year guidance for FY25, largely due to the decision to withdraw from its less lucrative Marine business.
BRP's market position has been bolstered by strategic inventory rationalization, targeting a reduction of field inventories by 15%-20% by the end of FY25. This inventory management has been a key factor in maintaining the Buy rating. DA Davidson's revised price target is based on a P/E multiple of 16.0 times the forecasted FY26 earnings per share (EPS) of $5.50.
In the third quarter, BRP posted adjusted earnings per share of C$1.16, significantly surpassing the consensus forecast of C$0.57. Revenue was reported at C$1.96 billion, exceeding expectations of C$1.39 billion. Despite a 17.5% YoY revenue decline due to softer demand and inventory reduction efforts, the results were better than anticipated in the current economic climate.
Looking ahead, BRP provided an optimistic outlook, forecasting full-year fiscal 2025 adjusted EPS of C$4.25 to C$4.75, well above the C$2.24 average analyst projection. These are the recent developments in BRP's business operations.
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