BRP Inc. reported second quarter results on September 3 that displayed a marked divergence between top-line and bottom-line performance. The company generated revenue of $2.24 billion, representing 18.5% year-over-year growth, yet normalized diluted earnings per share declined to a loss of $0.18 from a profit of $0.92 in the prior-year period. Tariff-related pressures drove the earnings deterioration despite robust demand signals across the business.
The off-road vehicle segment demonstrated substantial momentum, with Can-Am capturing nearly a third of North America side-by-side retail units on a model-year basis, an all-time high for the brand. Side-by-side retail share climbed more than three percentage points, while ATV retail expanded at a mid-single-digit pace even as the broader industry contracted. Utility cabin units have grown to represent nearly half the utility side-by-side market following a fourfold expansion over six years, prompting capacity increases of approximately 33%. Asia Pacific retail expanded 8%, outpacing industry growth rates.
Management raised full-year guidance despite the quarterly loss, lifting revenue expectations to a range of $9.23 billion to $9.475 billion and increasing normalized EPS guidance by $1 to a range of $4 to $4.5. Free cash flow reached $193 million for the quarter and $560 million year to date, with dealer inventory remaining controlled at roughly 100 days for off-road vehicles. However, gross margin contracted significantly to 11.7%, declining 940 basis points year-over-year, with Section 232 tariffs accounting for a substantial portion and a one-time $74.8 million supplier support payment reducing margins by an additional 330 basis points.
Management projects $200 million of net tariff exposure for the fiscal year, or approximately $225 million on an annualized basis, with an anticipated $60 million to $65 million additional headwind from a 50% Section 338 tariff on Spyder units imported from Canada next year. Elevated commodity and freight costs tied to energy prices added further pressure. Personal watercraft retail declined in the low single digits in North America, prompting shipment reductions, while Latin America retail fell 4% due to weaker Mexican demand. Third quarter guidance points to normalized EPS declining 50% to 60% year-over-year, largely attributable to tariff timing.
Hedge fund ownership declined to 19 funds from 24 in the prior quarter, suggesting institutional pullback amid tariff uncertainty. The forward price-to-earnings multiple stood at 15.24 as of September 11, appearing modest relative to the company’s near-20% revenue growth trajectory. The divergence between reduced institutional ownership and moderate valuation multiples warrants monitoring as trade conditions evolve.
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