# BRP (DOO)

Sector: Recreational vehicles

| Field | Value |
|---|---|
| Price | CA$78.54 |
| Fair value (Analysts) | CA$103.00 |
| Discount to fair value | 23.7% |
| Fair value uncertainty (Analysts) | High |
| Economic moat (Analysts) | Wide |
| LSEG analyst rating (1 strong buy to 5 strong sell) | 2.33 |
| Data as of | 2026-10-15 |
| Next earnings | 2026-12-03 (estimate) |

## In short

US tariffs now take a large part of BRP's profit, and the gap closes only as mitigation or a change in US trade policy restores its margins over several years.

## Themes and gap

- Themes: Tariffs and trade (trade-tariffs), Weak consumer (weak-consumer), Interest rates (interest-rates)
- Gap type: Slow (slow)
- Why: The US tariff on BRP's vehicles has no end date, so margins can recover only over several years of mitigation unless trade policy changes.

## About

BRP, based in Valcourt, Quebec, makes powersports vehicles and engines. Its brands include Ski-Doo and Lynx snowmobiles, Sea-Doo watercraft and pontoons, Can-Am off-road vehicles (all-terrain and side-by-side vehicles) and on-road vehicles, and Rotax engines. Year-Round Products, mostly Can-Am off-road vehicles, gave about 57% of revenue in fiscal 2026, and Seasonal Products, such as snowmobiles and watercraft, gave about 27%. BRP sells its vehicles to independent dealers, mostly in North America, and dealers sell them to consumers. It also sells parts, accessories and apparel. Many of the vehicles BRP sells in the US are imported, so US tariffs affect its costs. Its fiscal year ends on January 31, and it reports in Canadian dollars.

## Thesis

BRP trades at a discount because US tariffs now take a large part of its profit, and the market does not know how long they will last. On April 6, 2026, a change to the US Section 232 tariffs put a 25% tariff on the full value of imported snowmobiles and most off-road vehicles, and BRP estimated the extra cost at more than $500 million for the rest of the fiscal year before mitigation. BRP suspended its guidance on April 14, 2026. In the quarter to July 31, 2026, its gross margin fell to 11.7% from 21.1%, and it had a net loss of $136.8 million, partly because of a $74.8 million cost from a supplier's financial restructuring. BRP still gains share in off-road vehicles, and it raised its fiscal 2027 guidance on September 3, 2026, to normalized EPS of $4.00 to $4.50, lower than the $5.21 of fiscal 2026. For the gap to close, the tariff cost must fall, through mitigation, higher prices or a change in US trade policy, so that gross margin returns toward its level before the tariffs. Retail sales must also keep growing while BRP keeps its off-road market share. The first test is the Q3 fiscal 2027 report, expected in early December 2026, for which BRP expects normalized EPS down 50% to 60%. The next test is the fiscal 2028 outlook, expected in March 2027. The tariff has no end date, so the gap can close only over several years unless US trade policy changes. The main risk is that the tariffs stay and consumer demand weakens.

## Checkpoints

- Dec 3, 2026 (estimate): Q3 fiscal 2027 results: tariff cost and retail sales. Status: Pending. Watch: Normalized EPS at or above the guided fall of 50% to 60% and full-year guidance kept at $4.00 to $4.50 pass; a guidance cut or lower retail sales fail.
- Mar 2027 (estimate): Q4 fiscal 2027 results and fiscal 2028 outlook. Status: Pending. Watch: A fiscal 2028 outlook with higher normalized EPS and a gross margin that recovers from tariff mitigation passes; a lower outlook fails.
- 2027 (estimate): US tariffs on imported powersports vehicles. Status: Pending. Watch: A cut or exemption of the 25% Section 232 tariff on BRP's vehicles passes; tariffs that stay or rise fail.

## Balance sheet

- Cash: CA$648M
- Debt: CA$2.5B
- Net debt: CA$1.9B
- EBITDA, last 12 months: CA$1.2B
- Net debt / EBITDA: 1.6× (low)
- Interest cover: 1.8×
- Undrawn credit line: CA$1.3B
- Debt due within 12 months: CA$50M
- Last debt due: 2031

BRP had $2.50 billion of long-term debt at July 31, 2026. Most of it is the Term Facility: US$568.6 million of Term Loan B-2 due December 2029 and US$1,147.9 million of Term Loan B-3 due January 2031, both at Term SOFR plus 2.25% (5.98% at July 31, 2026). The rest is €58.8 million of Austrian term loans due from March 2027 to December 2030. BRP must repay 0.25% of the term loans each quarter, and it may have to repay more if it has excess cash and high leverage at year-end. Lease liabilities of $663.8 million are not in debt. The $1.5 billion revolving credit facility was not drawn, and $1,265.0 million was available under its borrowing base at July 31, 2026. EBITDA is normalized EBITDA for the twelve months to July 31, 2026. Interest cover is operating income divided by financing costs of $95.6 million for the first half of fiscal 2027. Free cash flow was $559.4 million in that half. BRP bought back $201.7 million of shares in the first half and pays a quarterly dividend.

As of 2026-07-31.

Sources:

- https://www.sec.gov/Archives/edgar/data/1748797/000119312526380888/d117601dex991.htm
- https://www.sec.gov/Archives/edgar/data/1748797/000119312526380888/d117601dex992.htm
- https://www.sec.gov/Archives/edgar/data/1748797/000119312526380894/d118875dex991.htm

## Recent events

- 2026-09-03: BRP reported Q2 fiscal 2027 results. Revenue was $2.24 billion, up 18.5%, from more off-road vehicle shipments. It had a net loss of $136.8 million and a normalized diluted loss per share of $0.18. Gross margin fell to 11.7% from 21.1% because of US tariffs and a $74.8 million cost from a supplier's financial restructuring. North American retail sales grew 1%. BRP raised its fiscal 2027 normalized EPS guidance to $4.00 to $4.50 and expected Q3 normalized EPS to fall about 50% to 60%. It also announced a planned change of its financial leadership.
- 2026-09-03: At its Club BRP dealer event, BRP committed to major off-road product news every six months for the next four years, and it launched BRP Financial Services, a branded retail financing program in the US.
- 2026-05-28: BRP reported Q1 fiscal 2027 results. Revenue was $2.39 billion, up 29.5%, and normalized diluted EPS was $1.83, up $1.36. North American powersports retail sales fell 7%, mainly because of a strong snowmobile season the year before. BRP gave new fiscal 2027 guidance with tariff costs net of mitigation: normalized EPS of $3.00 to $3.50.
- 2026-04-14: BRP suspended its fiscal 2027 guidance after a change to US Section 232 tariffs on steel, aluminum and copper, which took effect on April 6, 2026. The change puts a 25% tariff on the full value of imported snowmobiles and most off-road vehicles, in place of a 50% tariff on the metal content only. BRP estimated the extra cost at more than $500 million for the rest of the year, before mitigation.

## Risks

- High: US tariffs take a large part of BRP's profit. Since April 6, 2026, imported snowmobiles and most off-road vehicles pay a 25% tariff on their full value. BRP expects normalized EPS of $4.00 to $4.50 in fiscal 2027, against $5.21 in fiscal 2026. US trade policy can change again with little notice.
- High: Powersports vehicles are expensive purchases that consumers can delay. North American retail sales fell 7% in Q1 fiscal 2027 and grew only 1% in Q2, and seasonal product sales fell in Q2. If demand weakens, BRP must ship fewer units or spend more on sales programs.
- Medium: Suppliers are under pressure. The financial restructuring of a supplier cost BRP $74.8 million of gross profit in Q2 fiscal 2027. More supplier problems can stop production or add cost.
- Medium: BRP's term loans of about US$1.72 billion have a floating rate based on SOFR. Higher rates raise interest cost, and a stronger US dollar raises the Canadian dollar value of this debt.
- Low: Competition in off-road vehicles is strong. Lower sales programs helped BRP's margins in 2026, and more promotions in a weak market would lower them. BRP plans major off-road product news every six months for four years, which needs steady investment in research and development.

## Links

- Page: https://picks.kamadorueda.com/company/DOO/
- History of changes: https://picks.kamadorueda.com/company/DOO/history/
- JSON with full history: https://picks.kamadorueda.com/data/company/DOO.json

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