Not even the racing-inspired Indian FTR 1200 motorcycle could help pull Polaris Industries' (NYSE:PII) motorcycle business out of the slide it's in as third-quarter sales tumbled well in excess of those of the mid- and heavyweight motorcycle industry as a whole.

However, a strong performance in off-road vehicles and snowmobiles as dealers prep for the coming winter helped juice the powersports vehicle maker's results enough to lift both sales and profits for the period. Polaris reported sales of $1.77 billion, up 7% from last year, and earnings of $1.42 per share, a 5% decline.

Two snowmobile riders.

Polaris snowmobile deliveries help lift third-quarter results as motorcycles hit rough pavement. Image source: Polaris Industries.

Motorcycles continue to skid

Polaris said Indian Motorcycle retail sales plunged by mid-teen percentage rates due to the continued weakness in the market, but it was a much worse showing than that of the industry as a whole, which declined by high single-digit rates. Segment revenues fell 3% to $150 million, while gross profits dropped from $20 million last year to $12 million this quarter, a 40% decline. But the drop in profits had more to do with the impact of tariffs from the trade war and negative changes in the mix of bikes it sold.

While the motorcycle market as a whole has been spiraling downward, Polaris saw its bikes also pressured by a highly promotional sales environment, as manufacturers apparently are dramatically discounting motorcycles to move them off the lot.

That performance, though, is in marked contrast to Harley-Davidson (NYSE:HOG), which also reported third-quarter earnings, and U.S. motorcycle sales fell just 3.6%. Considering analysts had been forecasting declines of as much as 10%, it was a substantially better showing than expected. And since Polaris' Indian Motorcycle has outstripped sales of Harley for years, albeit from a much smaller base, it indicates Polaris lost a lot of market share ground this quarter.

Snowmobiles making cold cash

Fortunately for Polaris, its substantially larger off-road vehicle (ORV) segment did quite well this quarter, with sales rising 11% to $1.15 billion as side-by-side vehicles and the timing of snowmobile shipments helped lift the category. Gross profit also rose 11%. Even so, ORV retail sales were flat in the quarter, because despite low-single-digit increases by side-by-sides, ATV sales were down in the mid-single-digit range.

Conversely, snowmobile sales surged 53% in the period, given a big boost as dealers loaded their inventory for the coming season, but it was a change in the timing of their orders that drove the gains, because last year, their shipments occurred in the fourth quarter. The pull-forward effect, however, means Polaris will likely see a steep decline next quarter.

Still, the snowmobile business was good last winter, when snowy weather contributed to a mid-single-digit rise in sales in the first quarter.

The good and bad of everything else

Global adjacent markets, which includes utility vehicles and military sales, also had a strong quarter, with revenue up 18% year over year, particularly as government and defense contracts rose during the period. Polaris is also one of three finalists for a new infantry squad vehicle for the U.S. Army and will be delivering two prototypes next month. The Army is expected to choose a winner by early next year from vehicles delivered by Polaris, General Motors, and Oshkosh.

Polaris aftermarket business also looks like it might have finally turned around, with Transamerican Auto Parts posting a 2% increase in sales while the rest of its aftermarket business grew 5%. Total sales increased 3% in the quarter, but profits fell 7%, hurt by tariffs.

Last, it looks like Polaris may have decided to make a big splash in the boating industry at just the wrong time; sales tumbled 11%, which it blamed on a slowing marine business. Yet profits for the division rose 10% year over year, mostly due to selling more expensive boats. The decline doesn't bode well for Canadian powersports vehicle maker BRP, as it too dove into the boating business head first. It's expected to report earnings next month.

Outlook seems bright

Polaris Industries returned to strength in its core business, but its ancillary lines like motorcycles and boating look like they'll serve as drags in the future, offsetting gains made elsewhere.

Management was able to tighten its forecasts for the full year, though, raising the low end of full-year earnings to $6.20 per share while leaving the top end at $6.30 per share. Sales are expected to rise 12% year over year.

In the meantime, Polaris is now heading into the season in which its snowmobiles exhibit their prowess, and boosted by the Polaris 850 engine it introduced last year, winter sales could take off.