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Polaris Ends 2018 Strong, Warns of Profit Headwinds Next Year

By Steve Symington – Updated Apr 23, 2019 at 6:17PM

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The powersports leader pushed the pedal to the floor to end the year. But external factors will hurt earnings in 2019.

Polaris Industries (PII 0.90%) announced fourth-quarter 2018 results early Tuesday, highlighting accelerated growth and stronger-than-expected profits despite the impact of tariffs and broader macroeconomic concerns. 

Still, Polaris shares slumped as the company issued cautious guidance for the year ahead. So let's take a closer look at what Polaris had to say.

2019 model Polaris RZR Turbo driving offroad


Polaris Industries results: The raw numbers

Metric Q4 2018 Q4 2017 Year-Over-Year Growth


$1.627 billion

$1.431 billion


GAAP net income (loss)

$91.5 million

$31.5 million


GAAP earnings per diluted share





What happened with Polaris this quarter?

  • Adjusted for items like restructuring expenses and acquisition costs, Polaris' (non-GAAP) earnings climbed 14% year over year to $113.4 million, and rose 19% on a per-share basis to $1.83. 
  • For the full-year 2018, Polaris' adjusted revenue climbed 12% to $6.083 billion, translating to 29% growth in full-year adjusted net income to $6.56 per share.
  • These results were near the high end of Polaris' latest guidance (which it reaffirmed in October) calling for adjusted sales growth of 11% to 12%, and adjusted net income per share of $6.48 to $6.58.
  • Parts, garments, and accessories (PG&A) sales grew 6% year over year, driven by growth from snowmobiles and side-by-sides.
  • International sales (to customers outside North America) including PG&A grew 3% year over year (or 7% at constant currency) to $217 million.
  • Off-road vehicle (ORV) and snowmobile segment sales climbed 7% year over year to $1.06 billion, including 6% growth in PG&A. Within that total:
    • ORV wholegood sales fell 2%, primarily given a difficult comparison to last year's fourth quarter, when shipments were accelerated to address demand and inventory shortages in the second half of 2017.
    • Snowmobile wholegood sales soared 49% to $195 million, helped by the timing of shipments of pre-season SnowCheck orders thanks to the new 850 Patriot engine (which was available only in a pre-ordered snowmobile).
  • Motorcycle sales fell 15% year over year, as a slight increase in Indian Motorcycle sales was more than offset by lower Slingshot sales. Adjusted for the wind-down of Victory, motorcycle segment gross profit also plunged to $2 million from $8 million in the same year-ago period, hurt by an unfavorable product mix, and higher costs for tariffs, commodities, and logistics.
  • Global adjacent market sales rose 4% to $122 million, with growth in Aixam and Polaris Adventures.
  • Aftermarket segment sales fell 3% to $212 million, driven by lower sales from Transamerican Auto Parts.
  • Boats segment sales (comprised of revenue from last year's acquisition of pontoon boat leader Boat Holdings) were $145 million, slightly above expectations.

What management had to say

Polaris CEO Scott Wine stated:

Our strong performance during 2018 demonstrated the dedication and flexibility of our global team, as they drove improved financial and operating results for the year while adapting and executing our strategy to account for tariffs and other external pressures. Between sales growth in almost all of our segments, improved operational efficiencies, and a lower tax rate, we more than offset macro-economic and tariff headwinds, generating a 29 percent increase in earnings per share. Growth and market share gains in Off Road Vehicles, and the acquisition of Boat Holdings, further expanded our position as the global leader in Powersports, and established Polaris as a leader in the attractive, profitable and growing pontoon market. We are encouraged by our growth prospects for 2019 and beyond, but keenly aware of, and prepared for, the challenges and uncertainties presented by global trade and economic complications. 

Wine added that the company is focusing its investments on organic growth and productivity, and expects to continue to gain market share in both ORVs and motorcycles in the coming year.

Looking forward

For the full-year 2019, Polaris anticipates adjusted sales to climb in the range of 11% to 13% from $6.083 billion 2018 -- well above the roughly 10% growth Wall Street was expecting. However, Polaris is also targeting full-year 2019 adjusted net income per share of $6.00 to $6.25, down from $6.56 per share in 2018 and well below consensus predictions for earnings closer to $6.95 per share.

To explain the latter decline, Polaris noted its 2019 guidance assumes a $1.50-per-share negative impact to earnings related to a combination of tariffs, higher interests rates, and foreign exchange headwinds.

Nonetheless, given Polaris' relative outperformance in Q4 and strong top-line growth expected in 2019, it seems the market is relatively unconcerned with those external headwinds, with shares down only modestly today in response.

Check out the latest Polaris Industries earnings call transcript.

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.

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