With the holiday season comes that all-too-familiar chill in the air that makes some look forward to hauling their Ski-Doo out of mothballs and bombing around fields of snow. But for Ski-Doo maker BRP (TSE:DOO) (NASDAQ:DOOO), the picture is not so bright, as shares plunged over 14% in Thursday afternoon’s trading as its sluggish earnings left investors in a panic.
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BRP had an absolutely amazing quarter…last quarter. That quarter saw earnings surge 42% against the previous year’s figures, and most were looking for BRP to post another blue-ribbon quarter. Those hopes, however, failed to materialize, and instead of a big surge, BRP saw an open decline.
BRP posted earnings of $0.81 per diluted share, which was down 55% against the year prior. Revenue also slid, dropping to $2.47 billion this quarter against last year’s quarterly figure of $2.71 billion. Some pessimism injected into projections didn’t help matters either, as BRP looked for growth of 4% to 5% for the year, as opposed to previous projections calling for 7% to 10% growth.
The Problem? International Sales
While BRP had some positive points to highlight—you don’t make $2.47 billion in a quarter and call it a “bad quarter” unless you mean in comparison to an earlier, better quarter—it was clear where it was lagging – the international market. BRP pointed out that it’s seen “solid retail sales growth” and “further market share gains,” particularly in the North American powersports industry. However, the international market featured “softening demand” which ultimately proved a drag on earnings. Naturally, BRP has already adjusted its production backward, which will likely result in lower expenses and hopefully an improved profit picture.
Is BRP a Good Stock to Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on DOO stock based on 11 Buys and one Hold assigned in the past three months, as indicated by the graphic below. After a 22.84% loss in its share price over the past year, the average DOO price target of C$135.50 per share implies 65% upside potential.
