BMO Capital Markets analyst Gerrick Johnson has provided Powersports Business readers with a research note related to Polaris reporting its Q3 2021 results on Tuesday, Oct. 26.
Among other insights, BMO expects the company “to report North American off-road vehicle retail unit sales to be down -20% (-2% vs. 2019).”
Here’s Johnson’s report:
“We expect that Polaris' (PII) 3Q21 results will benefit from continued strong retail demand, though investors remain concerned about the company's ability to get inventory to its retail partners. We think the company's distribution network is operating better than many of its competitors, but still runs the risk of missing Street consensus estimates. While price increases and minimal discounting likely won't fully offset cost inflation and supply chain inefficiencies, we think any upside in our model could come from margin performance.
“We expect PII to report adjusted EPS of $1.87, down from $2.85 in 3Q20. We are below the Street consensus of $1.96.
“We expect the PII to generate revenue of $2.1 billion, up +7% from $1.96 billion in 3Q20. The Street consensus is for revenue of $2.13 billion (+9%).
“Segment revenue expectations:
“ORV/Snowmobiles: $1.33 billion (+3.2% y/y), with ORV up +5%.
“Motorcycle: $203 million (+22%)
“Global Adjacencies: $127 million (+19%).
“Aftermarket: $240 million (+1%).
“Boats: $200 million (+29%).
“We expect the company to report North American off-road vehicle retail unit sales to be down -20% (-2% vs. 2019). PII continues to benefit from a surge in demand from people seeking to spend time outdoors while remaining socially distant, as well as a very healthy farm economy. However, retail performance will be limited by a lack of dealer inventory.
“We expect adjusted gross margin to contract -420 bps year over year to 23.3% owing mainly to higher input and logistics costs as well as inefficiencies from out of order production owing to component delays. With price increases, overhead absorption, minimal promotions and limited floorplan support, we think gross margin could be one area of upside to our model. The Street is assuming a gross margin of 23.0%.
“PII’s 2021 guidance calls for adjusted EPS of $9.35 to $9.60 (+21% to +24%) on sales of $8.375 to $8.5 billion (+19% to +21%). We do not expect that guidance to be revised higher this quarter.
“For 2021, we currently estimate EPS of $9.60 (+24% y/y) on revenue of $8.60 billion (+22%). The current Street consensus is EPS of $9.57 (+24%) on revenue of $8.51 billion (+21%).”