In an research note provided to Powersports Business on Tuesday, BMO Capital Markets analyst Gerrick Johnson reports that despite “poor weather across much of North America this Spring, and continued recall activity, we have found that Polaris dealers still tend to be optimistic about the brand. We have been positively surprised by generally good commentary from dealers in spite of challenging spring weather.”
Johnson adds that with “one month to go in Q2, we believe Polaris can grow North American ORV retail sales by 3-5 percent. We believe such performance could be viewed positively, as we think many investors hold a more negative view, concerned that retail sales could decline once again.”
Johnson goes on to report that “most Polaris dealers we speak with are flat to slightly up so far in ORV sales in 2Q, but lamenting the fact that they could be up even more if the weather had cooperated. We do find a few dealers who are trending down in the second quarter, though we find more who are up.
This anecdotal feedback is consistent with the results of our more scientific BMO/Powersports Business dealer surveys, where we have been seeing sequential improvement in many year-over-year metrics, as well outlooks, continuing a trend of improvement that began in 3Q16.
“Dealers continue to comment that the highly publicized recalls over the last 18 months have not had a long-lasting negative impact on the brand or their sales. While the recalls of 2016 caused some near-term dislocation, the most recent recalls have been ‘non-issues.’
“A key component of our Outperform thesis has been incremental improvement in the health of the farm community, which is a large consumer of Ranger utility SxSs as well as Sportsmen ATVs. And recently, we note that all signs are pointing to improvement.
“Competition is still fierce, with high-quality machines entering the marketplace from strong companies like Can-Am (BRP) and Honda. Also, with Arctic Cat recently being acquired by Textron, we are seeing significant rebate offers to clear the overloaded Arctic Cat dealer channel.”