Polaris to report Q2 earnings Tuesday; analyst offers expectations

BMO Capital Markets analyst Gerrick Johnson has provided Powersports Business with a research note ahead of the Polaris Q2 earnings report on Tuesday, July 26.

Here’s a look at BMO’s expectations:

“We expect Polaris (PII) to report 2Q22 adjusted EPS of $1.78 (-34% y/y), below the consensus estimate of $2.09 (-23% y/y); We expect revenue to increase +7% y/y to $2.27 billion, above the Street at $2.18 billion.

“We expect retail will be down significantly y/y, once again limited by a lack of inventory. We also expect that, owing to guidance being back-half loaded and macro conditions have seemingly worsened since its last report, guidance will be reduced.

“Key Points

“We expect PII to report North American off-road vehicle retail unit sales to be down -25% y/y. While we think consumer demand has remained strong, retail sales continue to be suppressed by a lack of inventory. In our 2Q22 BMO/Powersports Business Dealer Survey PII did not perform well, with only 34% of dealers reporting y/y ORV growth in the quarter (average y/y retail change was a decline of -6%). Only 25% of Indian Motorcycle dealers reported growth (average y/y retail change was -5%). Dealers remain highly frustrated at the rate of product deliveries, which is greatly hampering retail sales.

“For 2Q22, we expect off-road segment sales will increase +8% y/y to $1.49 billion and on-road revenue to grow +9% to $310 million. We expect marine revenue to grow +14% to $225 million and aftermarket sales to increase +2% to $244 million. PII recently announced it has sold its Transamerica Auto Parts business to Clearlake Capital for $50 million, net of cash, debt and other costs (PII bought TAP for $665 million late in 2016).

“Our adjusted gross margin estimate calls for -420 bps of contraction to 21.9% from 26.1% owing mainly to inflationary pressures and supply chain challenges, partially offset by pricing, subdued promotional environment, and sourcing mitigation efforts. We are below the Street's expectation for 22.6%.

“PII’s 2022 guidance is for adjusted EPS of $10.10-$10.40 (+11% to +14%) on revenue of $9.215-$9.455 billion (+12% to +15%). For 2022, we currently estimate EPS of $9.50 (+4% y/y) on revenue of $9.3 billion (+13%). The current Street consensus is EPS of $9.96 (+9%) on revenue of $9.17 billion (+12%).”