Analyst: New Polaris ACE ‘will have legs’

Here’s how Robin M. Farley, an analyst with UBS Investment Research, describes the introduction of the Polaris Sportsman ACE, in a research note provided to Powersports Business:

“Polaris announced today the introduction of a new off-road vehicle, the Sportsman ACE, an ATV with the comfort features of a SSV including a bucket seat and a cage, but at a lower price point than an SSV. MSRP for the ACE is $7,499, which compares to Polaris Ranger 900 SSV at $13,199 and PII’s Sportsman ATVs at 6,499 MSRP. So it’s the comfort of a SSV at close to the price of an ATV. Inventing a new category of off-road vehicle is a pretty good way to corner market share. And we believe this will have legs — we envision new product intros over several model years, including different engine sizes in the rec/utility category, performance versions.  Sportsman ACE is expected to ship in Feb’14.”

New Category Introductions To Drive Growth In Off-road

“The ATV market peaked at 1.14 million units in 2005, and after 6 years of decline, while 2012 managed to eke out +2% growth in industry sales, ATV sales as of beginning of 2013 were still down cumulatively more than 60% from 2005 peak. SSVs are only 353k units per year, but are much more expensive and are 2-seaters so a vehicle that has the combination of comfort and lower price will in our view benefit from the demographic shift (“with age comes the cage”) that has been driving PII’s growth in SSVs.”

We Expect Low Teens Growth In 2014E To Continue

“We believe the ACE provides upside to our current estimates, which do not yet factor in ACE. We currently expect +11% sales growth in PII’s off-road segment, driven by +4% growth in ATVs and +15% in SSVs. We estimate every 5% of sales in ATV is roughly $0.06-$0.07 in EPS for Polaris. We wouldn’t be surprised to see some cannibalization of ATV sales, but more importantly we would expect PII’s ACE will cannibalize others ATV sales.”