Polaris Industries (NYSE:PII) released impressive second-quarter 2019 results Tuesday morning, sending shares revving higher as the company showcased its ability to withstand the impact of tariffs, unfavorable weather conditions, and steep promotions from competitors. The off-road vehicle and motorcycle leader also increased the bottom ends of its full-year outlook.

Let's buckle up for a closer look at how Polaris ended the first half, and what to watch for the rest of the year.

Two-seat Polaris RZR spraying dust behind it on a rocky mountain landscape.

Image source: Polaris.

Polaris Industries results: The raw numbers

Metric Q2 2019 Q2 2018 Change

Sales

$1.779 billion

$1.503 billion

18.4%

GAAP net income (loss)

$88.3 million

$92.5 million

(4.5%)

GAAP earnings per diluted share

$1.42

$1.43

(0.7%)

Data source: Polaris. 

What happened with Polaris this quarter?

  • Adjusted for items like restructuring and acquisition expenses, non-GAAP net income was $107 million, or $1.73 per share, down from $1.77 per share in the same year-ago period.
  • Polaris doesn't typically provide specific quarterly guidance. So for perspective, most analysts were modeling lower adjusted earnings of $1.65 per share on revenue of $1.77 billion.
  • Revenue for parts, garments, and accessories (PG&A) grew 10% year over year, with broad-based growth across each business segment.
  • International revenue grew 13% to $231 million, driven by Indian motorcycles and the Global Adjacent Market business.
  • The combined off-road vehicle (ORV)/snowmobiles segment grew sales 6% to $1.049 billion. That total included:
    • a 4% increase in ORV wholegood sales, thanks primarily to higher average selling prices (ASPs), and
    • snowmobile wholegood sales of $16 million, up from $4 million a year earlier in the seasonally slow quarter.
  • ORV/snowmobile gross profit margin fell 20 basis points, as higher ASPs and productivity were offset by higher promotions and tariff costs.
  • Motorcycle segment sales grew 15% to $197 million, as higher Indian sales more than offset declines in Slingshot sales. Motorcycle gross profit grew $2 million to $27 million, as higher volumes mostly offset the impact of tariffs. 
  • Global adjacent market sales grew 7% to $122 million.
  • Aftermarket segment sales grew 1% to $229 million, as flat sales from Transamerican Auto Parts (TAP) effectively offset growth from other aftermarket brands.
  • Boats segment sales arrived at $182 million.

What management had to say

CEO Scott Wine stated that this quarter demonstrated Polaris' "deft leadership and disciplined execution," adding:

We worked diligently to overcome the impacts of tariffs, a very wet spring, and an aggressive promotional environment, delivering financial results slightly favorable to expectations but trailing our long-term performance goals. The strength of our industry-leading brands and vehicles enabled us to gain share in Indian Motorcycles and drive growth in Side-by-Sides with RANGER and RZR, although our decision to assume price leadership did impact volume, specifically in our lower-margin youth and value segments. We are encouraged by our market-share gains and year-to-date growth in Boats, as well as the continued improvement at TAP, where retail store sales growth was up nicely. Our operational and dealer fundamentals are in good shape as we head into the critically important model year 2020 product introductions, and we anticipate improved retail performance during the second half of the year.

Looking forward

Given its slight outperformance so far this year, Polaris favorably narrowed its full-year 2019 guidance to call for revenue growth of 12% to 13% (from 11% to 13% three months ago), and adjusted net income per share of $6.10 to $6.30 (up from $6.05 to $6.30 previously). The latter range includes the impact of recently increased tariffs in China (to 25% from 10% starting in May 2019), which are being partly offset by Polaris' tariff-mitigation efforts.

All things considered, this was as solid a quarter as any Polaris investor could have asked given the headwinds it faces. The company is astutely handling the variables within its control and taking market share from competitors in the process, despite holding strong on pricing. Polaris stock is rightly climbing in response today.