Polaris Industries Inc. (NYSE:PII) announced third-quarter 2018 results early on Monday, detailing encouraging demand for its newest products, the first contributions from its recent acquisition of pontoon boat specialist Boat Holdings, and its view on recent tariff and trade concerns.

With Polaris stock climbing as much as 8% early today before settling to close up 2.3%, let's dig deeper to see how the off-road vehicle specialist fared as it kicked off the second half.

Man riding a Polaris Indian motorcycle.

IMAGE SOURCE: POLARIS INDUSTRIES.

Polaris Industries results: The raw numbers

Metric

Q3 2018

Q3 2017

Year-Over-Year Growth

Sales*

$1.651 billion

$1.479 billion

11.6%

GAAP net income (loss)

$95.5 million

$81.9 million

16.6%

GAAP earnings per diluted share

$1.50

$1.28

17.2%

*AS REPORTED, DATA SOURCE: POLARIS INDUSTRIES.

What happened with Polaris this quarter?

  • On an adjusted (non-GAAP) basis -- which excludes items like restructuring and acquisition expenses -- net income climbed 20.9% year over year to $117.9 million. After accounting for share repurchases over the past year, adjusted net income per share increased 22.4% to $1.86.
  • Polaris doesn't provide specific quarterly guidance. So for perspective -- and though we don't usually pay close attention to analysts' estimates -- these results compared favorably to consensus estimates for adjusted earnings of $1.57 per share on revenue of $1.64 billion.
  • Parts, garments, and accessories (PG&A) sales (excluding aftermarket segment revenue) grew 8% year over year.
  • International sales including PG&A grew 10% year over year (or 13% at constant currency) to $172 million, driven by strong snowmobile and motorcycle sales.
  • Off-road vehicle (ORV) and snowmobile sales grew 3% year over year to $1.036 billion, including a 12% increase in PG&A sales.
    • Within that total, ORV wholegood sales grew 12%, driven by higher RANGER and ATV shipments. 
    • Snowmobile wholegood sales fell to $69 million from $144 million in the same year-ago period, primarily due to timing of shipments, as snowmobile sales are expected to be heavily weighted toward the fourth quarter.
  • Motorcycle sales were roughly flat at $155 million, as declines in North American slingshot sales were more than offset by continued growth in sales and global market share from Indian Motorcycle.
  • Global adjacent market sales grew 5% year over year to $96 million.
  • Aftermarket segment sales climbed 2% to $230 million, as another slight decline from Transamerican Auto Parts was more than offset by growth from Polaris' powersports aftermarket brands.
  • Boats segment sales (consisting of revenue from the Boat Holdings acquisition) were slightly above expectations at $134 million during the quarter.

What management had to say

Polaris CEO Scott Wine stated:

Our model year '19 product news was well received and our improving manufacturing and logistics performance accelerated the successful roll-out of [retail flow management] for side-by-sides. International growth again outpaced North America, with Indian market share gains continuing in every market we serve. We were also pleased with the early performance of Boat Holdings, the largest manufacturer of pontoon boats in the U.S. that we welcomed to our growing Powersports portfolio earlier in the quarter. Our commitment to customers and investments in the U.S. remain strong, as we broke ground on a new multi-product PG&A and aftermarket distribution center in Nevada. We are strategically and tactically committed to being a customer-centric, highly efficient growth company, and our investments demonstrate that commitment.

Wine also cautioned that while Polaris still faces "serious challenges" from tariffs, the company has made great strides in making improvements to its supply chain, safety, quality, and innovation initiatives that position it well for the future.

Looking forward

Given its performance through the first three quarters, Polaris also reaffirmed its full-year outlook. As a reminder, that outlook calls for 2018 adjusted sales growth of 11% to 12%, and adjusted net income per share of $6.48 to $6.58. 

That doesn't mean Polaris is in the clear as it pertains to concerns over global trade and economic stability. To that end, management noted that their reaffirmed guidance considers the "fluid nature of tariffs and the potential impact of trade negotiations and a more difficult motorcycle environment."

It's encouraging to know, however, that the underlying performance of Polaris' business was enough to help effectively negate the potential negative impact of these threats. And it's no surprise to see shares trading higher in response.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Polaris Industries. The Motley Fool has a disclosure policy.