Narrow-Moat BRP Capitalizes on Manufacturing Prowess to Increase Inventory Throughput

Narrow-moat BRP posted stellar third-quarter results that included sales of CAD 2.7 billion (up 71%) and normalized EPS of CAD 3.46 (up 146%) handily outpacing our CAD 2.2 billion and CAD 2.42 forecasts. The year-round and seasonal segments, together composing 85% of sales, outperformed, with sales rising 74% and 133%, respectively. And despite robust growth, we don’t fear channel stuffing given that third-quarter retail sales rose 39% ex-pontoons and 40% of fourth-quarter units were presold at quarter-end. Additionally, overall dealer inventory remains 20% below the prepandemic (third-quarter 2020) level, with the sizable ORV segment down 42%, resulting in a CAD 750 million inventory backfill opportunity. Full-year sales growth guidance was lifted to 27%-32% (from 26%-31%), in line with our 28% preprint estimate, and implies fourth-quarter sales that slow to a low-20% pace. This would represent a fourth-quarter sales level 45% higher than the quarter ended Jan. 31, 2020.