S&P Global has upgraded its rating on BRP (DOO.TO) to BB+ from BB, on an improved business risk profile and stable outlook.
The agency said it removed its negative one-notch financial policy modifier to reflect Bain Capital's lower ownership stake in BRP -- which stood at 11% as of December, with about 20% voting rights.
S&P noted BRP enjoys 50%-55% of market share in the snowmobile and personal watercraft segment, with a "solid" second position in the off-road vehicles (ORVs) segment. It also rightsized its inventory ended fiscal 2026 with 17% lower inventory levels in North America compared to a year ago. Fourth-quarter 2026 performance was strong, outperforming the powersports industry across majority of product categories -- ORVs (ATVs and SSVs) and snowmobiles.
"We believe BRP is well positioned to replenish inventory, and we forecast revenue growth of 6%-7% in fiscal 2027. We also estimate that BRP's top line will benefit by C$400 million-C$500 million in fiscal 2027 due to higher shipments relative to last year. Continued strength in year-round products and steady demand for parts and accessories should further improve top line," S&P said.
The agency expects EBITDA margins to improve to around 13.8% in fiscal 2027 mainly due to product-mix benefits (growth of high-margin ORVs) and improved fixed-cost absorption (asset utilization up to 70% from 65%).
S&P expects BRP will manage capital "prudently" and forecasts capital expenditure of about C$400 million-C$450 million annually over the next 12-24 months. It estimates free operating cash flow (FOCF) of C$400 million-C$500 million annually.
"The stable outlook incorporates our view that BRP will maintain net debt to EBITDA of about 2x in fiscal 2027, as revenue and EBITDA improve from the trough in fiscal 2026," S&P said.