Please ensure Javascript is enabled for purposes of website accessibility

Why Polaris Industries Inc. Stock Plunged Today

By Steve Symington - Dec 17, 2015 at 1:55PM

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

Polaris reduced guidance amid a challenging retail environment. Here's what investors need to know.

What: Shares of Polaris Industries (PII 0.43%) were down 9.6% as of 12:50 p.m. EST Thursday after the off-road vehicle specialist reduced its full-year 2015 sales and earnings guidance.

So what: Specifically, Polaris now expects 2015 revenue to grow in the range of 4% to 5% over 2014, compared to previous guidance for year-over-year growth of 10% to 11%. Full-year earnings per share are also expected to be up 1% to 2% over 2014, compared to previous guidance for growth of 11% to 12%. To blame, Polaris says, is the weaker-than-expected retail environment in North American for its Off-Road Vehicles and Snowmobiles segments. And this weakness, in turn, has also negatively affected Polaris' parts, garments, and accessories sales.

Polaris CEO Scott Wine elaborated, "In our third quarter earnings call, I talked about slower near-term growth for the powersports industry and what it signified for our performance. We expected the fourth quarter to present a challenging retail environment for ORVs and Snowmobiles, but consumer traffic and retail sales have slowed beyond previous expectations."

Now what: To its credit, that means Polaris isn't necessarily to blame. The softness in the North American ORV industry is broad-based, and Polaris noted snowmobile industry sales are down in the mid-teen percentage range so far this season due to unusually warm weather patterns in the U.S. Snowbelt. Nonetheless, Polaris is immediately reducing Q4 off-road vehicle shipments accordingly, and now expects off-road vehicle dealer inventory to be below 2014 levels by the end of the year. Meanwhile, Snowmobile inventory is expected to be higher on a year-over-year basis, mainly as dealers began to build inventory ahead of the winter selling season last quarter.

In the end, though, investors should applaud Polaris for biting this bullet and taking action to position itself well, with leaner dealer inventories for its core ORV segment headed into 2016. While this industry weakness certainly isn't ideal, Polaris remains solidly profitable and I'm convinced the company should be able to continue creating shareholder value over the long term.

Steve Symington has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Polaris Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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
$120.24 (0.43%) $0.52

*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
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

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.