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Analyst: Recalls likely to take a bite out of Polaris Q2 earnings

 

Polaris announces its second quarter earnings on Wednesday, July 20, and one analyst is expecting that Polaris Q2 retail sales “could be down 10 percent or more.”

In a research note provided to Powersports Business, BMO Capital Markets analyst Gerrick Johnson reports that BMO will be “lowering our 2Q sales and EPS estimates for Polaris (PII) owing to weak 2Q retail demand trends in its North American off-road vehicle (ORV) business. We now believe the company will report 2Q EPS of $1.00, down from our prior estimate of $1.12. The Street consensus EPS estimate is $1.09. The company reported EPS of $1.49 in 2Q15. We are lowering our 2Q revenue estimate to $1.041 billion, a decline of -7% and a reduction from our prior outlook of flat at $1.12 billion. The Street consensus estimate is currently for flat sales growth.”

Johnson goes on to add that BMO believes “the recreational off-road vehicle category is still strong and showing increases in retail. However, we believe PII has lost share owing to the following: 1) increased competition from new, innovative models from Honda, Yamaha, and BRP (Can-Am) in the recreation and rec-ute segments; and 2) the company’s recent recall of 133,000 900cc and 1000cc RZR recreational units in April, which included a no sale/no ride order. The utility segment still remains weak, in our opinion, owing to lower commodity prices in ag and energy, where PII is overexposed with its market-leading Ranger side-by-sides and Sportsman ATVs. Given these issues, we believe Polaris’s 2Q retail sales could be down -10% or more.”

BMO continues to rate Polaris stock as Market Perform.

— Dave McMahon, Editor in Chief, Powersports Business

 

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