A week ago, BRP Inc. (TSE:DOO) came out with a strong set of quarterly numbers that could potentially lead to a re-rate of the stock. BRP beat earnings, with revenues hitting CA$1.6b, ahead of expectations, and earnings per share outperforming analyst reckonings by a solid 12%. Following the result, analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we collected the latest post-earnings consensus estimates to see what could be in store for next year.
Taking into account the latest results, the current consensus from BRP's eleven analysts is for revenues of CA$6.37b in 2021, which would reflect a satisfactory 7.2% increase on its sales over the past 12 months. Earnings per share are expected to jump 24% to CA$4.38. In the lead-up to this report, analysts had been modelling revenues of CA$6.22b and earnings per share (EPS) of CA$4.21 in 2021. So there seems to have been a moderate uplift in analyst sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
It will come as no surprise to learn that analysts have increased their price target for BRP 13% to CA$72.59 on the back of these upgrades. It could also be instructive to look at the range of analyst estimates, to evaluate how different the outlier opinions are from the mean. Currently, the most bullish analyst values BRP at CA$80.00 per share, while the most bearish prices it at CA$65.00. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or that analysts have a clear view on its prospects.
It can be useful to take a broader overview by seeing how analyst forecasts compare, both to the BRP's past performance and to peers in the same market. It's pretty clear that analysts expect BRP's revenue growth will slow down substantially, with revenues next year expected to grow 7.2%, compared to a historical growth rate of 10% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 13% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect BRP to grow slower than the wider market.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around BRP's earnings potential next year. Fortunately, analysts also upgraded their revenue estimates, although our data indicates sales are expected to perform worse than the wider market. There was also a nice increase in the price target, with analysts feeling that the intrinsic value of the business is improving.
Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. At Simply Wall St, we have a full range of analyst estimates for BRP going out to 2022, and you can see them free on our platform here..
You can also see whether BRP is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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