Please ensure Javascript is enabled for purposes of website accessibility

Polaris Industries Rides Higher Off-Road Sales to Big Gains

By Rich Duprey - Jan 30, 2020 at 8:49AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Off-road vehicles, snowmobiles, and even motorcycles turned in a strong performance.

Polaris Industries (PII 2.95%) was unable to overcome the strong snowmobile sales performance of a year ago, as sales tumbled 10% year over year, but healthy off-road vehicle sales and surprisingly robust Indian Motorcycle sales helped the powersports vehicle maker post a positive fourth-quarter earnings report.

Revenue of $1.7 billion, just shy of analyst expectations, was up 6.7% from last year while profits of $1.83 per share easily beat Wall Street's forecast of $1.78 per share, even though the results were flat year over year.

A Polaris Industries General 1000 utility vehicle

Image source: Polaris Industries.

Taking the long view

Last year's SnowCheck pre-order program drove snowmobile wholegood sales 49% higher with the timing of shipments from the program rising to its highest level in 17 years. Wholegoods are Polaris vehicles, parts, or accessories that it manufactures and ships to its distributors and dealers. So it was not much of a surprise that sales this time around came up short, with wholegood sales down 10% this time around.

Although Polaris didn't provide a dollar figure this year for its wholegood sales, based on last year's results the drop suggests they were around $175 million, which would be up 33% from 2017, meaning snowmobile sales were still comparatively strong.

Polaris off-road vehicle performance was also helped by the recovering market for side-by-side vehicles and ATVs, both of which were up by low- and mid-single-digit increases, respectively, and largely in line with the industry, which rose by low-single-digit rates.

The new models of RZR, Ranger, and General recreational and utility vehicles the company introduced at the end of the third quarter seems to have helped boost sales this time around. Overall off-road vehicle wholegood sales rose 13% year over year. 

Two wheels are better than three

The real surprise seems to be in the motorcycle segment, where sales surged 37% on the strength of its Indian brand. While sales for the bikes had been weak in recent periods, suggesting it was running into a problem similar to the one facing Harley-Davidson (HOG 3.50%), which can't sell its big expensive bikes, Polaris said its sales were strong this quarter.

While the powersports vehicle maker isn't nearly as transparent as Harley is regarding sales and shipments, as it breaks down the numbers by type of motorcycle and region, Polaris did say Indian's retail sales were up by mid-single-digit percentages. In comparison, Harley-Davidson also reported its sales fell 3% for the quarter.

The actual numbers had to be good because retail sales of the motorcycle segment, which includes both Indian and the three-wheeled Slingshot, were down for the period due to Slingshot sales falling once again. 

Polaris has the three-wheeler on a short lease and recently released a new model with an automatic transmission to attract more buyers, but with a starting price tag of $26,500 -- some $5,500 more than the manual Slingshot -- it seems difficult to believe it is going to generate many sales. And with rival BRP (DOOO 4.63%) selling its three-wheeled Can-Am Ryker (also an automatic) for just $8,500, moving a Slingshot off a dealer's lot seems like a long shot.

For a company that has its finger on the pulse of consumer demand across almost all of its business, Polaris feels really off base with the three-wheeled bike.

Still a little seasick

Of course, that had been the same kind of feeling one got after Polaris acquired Transamerican Auto Parts, the aftermarket parts retailer for Jeeps and trucks, but after a number of quarters where sales slid, it recorded a 1% increase this quarter. The rest of Polaris aftermarket business saw sales rise 22% year over year.

The new boat business might take some time to get its sea legs, too, though the fourth quarter's winter months are probably not the best ones to get a sense of where it's heading. Sales, were down 7% from last year, which Polaris said was due to poor product mix and planned dealer inventory reductions. Polaris has been adjusting shipments to protect dealer inventories, as industry demand is weak.

Ready to roar

Not every aspect of Polaris Industries' business is performing up to par, but in its most important segment -- off-road-vehicles -- it looks like it's regained its balance. With the fourth quarter typically one of its biggest, and this one coming in stronger than expected on several fronts, it's not surprising the market reacted by sending the powersports vehicle maker's stock higher.

 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Polaris Industries Inc. Stock Quote
Polaris Industries Inc.
PII
$107.57 (2.95%) $3.08
Harley-Davidson, Inc. Stock Quote
Harley-Davidson, Inc.
HOG
$32.80 (3.50%) $1.11
BRP Inc. Stock Quote
BRP Inc.
DOOO
$65.14 (4.63%) $2.88

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
336%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.