Polaris Industries Inc. designs, engineers, manufactures, and markets off-road vehicles, snowmobiles, motorcycles, and small vehicles primarily in the United States, Canada, Western Europe, Australia, and Mexico. It offers off-road vehicles, such as all-terrain vehicles and side-by-side vehicles for recreational and utility use; snowmobiles consisting of various models, including independent front suspension, long travel rear suspension, hydraulic disc brakes, liquid cooling for brakes, and a three cylinder engine; V-twin cruiser motorcycles; small vehicles, including enclosed on-road quadricycles and light duty commercial vehicles; and technical riding gears for the snowmobile and motorcycle industries. The company also provides replacement parts and accessories consisting of winches, bumper/brushguards, plows, racks, mowers, tires, pull-behinds, cabs, cargo box accessories, tracks, and oil for off-road vehicles; covers, traction products, reverse kits, electric starters, tracks, bags, windshields, oil, and lubricants for snowmobiles; and saddle bags, handlebars, backrests, exhausts, windshields, seats, oil, and various chrome accessories for motorcycles. It sells its products through a network of independent dealers and distributors primarily under the RANGER, RZR, RANGER Crew, Victory Vision, Victory Cross Roads, Cross Country, Indian Chief Classic, Indian Chief Vintage, Indian Chieftain, Roadmaster, Scout, Victory Magnum, and Polaris RUSH names. Further, the company markets recreational apparel, which includes helmets, jackets, bibs and pants, leathers, and hats through dealers and distributors, as well as through sites polaris.com, indianmotorcycle.com, klim.com, kolpin.com, and proarmor.com. Polaris Industries Inc. was founded in 1987 and is headquartered in Medina, Minnesota.
(Summary) (Company) (Chart)
18 November 2015
1yr Target $139.44
Payout Ratio 29.98%
1yr Cap Gain 32.59%
1yr Tot Return 34.60%
EPS (ttm) $7.07
EPS next yr $8.29
EPS next 5yr 15.00%
1yr Potential $124.35
Market Cap $6.89 Bil
Revenues $4.89 Bil
Earnings $480.10 Mil
Profit Margin 9.81%
1yr EarnGR 11.63%
3yr EarnGR 15.75%
5yr EarnGR 20.22%
1yr DivGR 10.41%
3yr DivGR 12.59%
5yr DivGR 21.52%
Quick Ratio 0.70
Current Ratio 1.40
One look at the company's fundamentals and another look at the company's chart and you instantly know something doesn't make sense. The fundamentals are telling me that this is an excellent company to own and the chart is telling me this has been a terrible time to own the shares. The company's record results demonstrate the effectiveness of the company's long term strategy and the resiliency of the Polaris organization.
Motorcycle growth has been accelerating, Off Road Vehicle share gains have continued and the company's developing adjacent products have built momentum. All of this was accomplished in the very difficult environment both of weakening currencies and softening economies. This only added to the ongoing pressure from the sluggish oil and agriculture markets, all in the midst of the most competitive powersports environment in a decade.
- Foreign exchange remained a primary antagonist, as revenue was up 16% on a constant currency basis.
- Results exceeded consensus estimates, which called for revenue of $1.43 billion and earnings of $2.28 per share.
- International sales rose just 1% to $153.6 million, but would have climbed 18% excluding currencies.
- North American retail sales rose 7% year over year
- The off-road vehicle segment revenue rose 3% to $822.9 million
- Snowmobiles revenue increased 14% to $185.5 million (up 19% year to date, due to the timing of shipments last quarter to give dealers early access to new premium models).
- Parts, garments, and accessories rose 3% to $226.3 million.
- Global adjacent markets (including government/military and work and transportation) rose 10% to $60.8 million.
- Motorcycle revenue skyrocketed 154% to $160.4 million.
- Resolved inefficiencies with "consistent enhancements" to Spirit Lake paint system, helping stabilize operations and exceeding shipment goals for the first time in 2015. Further optimizations and upgrades are planned for the next six months.
- Acquired a paint facility in South Dakota, which will bolster paint capacity later in Q4.
Foreign exchange rates are projected to show little, if any, abatement in the next year and currency exchange rates may have actually worsened since Polaris' second quarter earnings report. Analysts now anticipate that currencies will reduce full year 2015 total reported revenue by $150 million to $170 million. This will also reduce gross profit by $75 million to $85 million and reduce pre-tax income by $70 million to $80 million. That's roughly a 7% decrease from earlier projections.
But due to aggressive counter measures in anticipation of the foreign exchange challenge, management has reported that it was able to merely narrow (not reduce) 2015 guidance. Currently it anticipates 2015 revenue to increase 10% to 11% year over year, compared to its previous range of 10% to 12%, while earnings per share are expected to be $7.37 to $7.42, up 11% to 12% and compared to previous guidance for 10% to 12% growth.
Management has also offered guidance regarding 2016 noting that they are not willing to predict a global recession in the next 15 months, but there is evidence the economy will continue to slow. Management also stated that Polaris intends to continue to lead its core markets by consistently introducing innovative new motorcycle and off-road vehicle models, while at the same time continuing to enhance operational execution. In the end, they expect that the company will be able to continue extending its streak of achieving record quarterly earnings. And over the long term, when these headwinds finally abate, Polaris should emerge stronger than ever.
Looking at the price chart of the stock in this company it's apparent that the stock has been falling for some time now. In fact, it's lost about a third of its market capitalization just since summer. That fall seems to have taken a company whose stock was obviously overvalued down to a more reasonable level. At a P/E of less than 15 and a PEG below 1, this may just be the best time in years to own this stock.
If management is correct, and the fundamentals seem to back them up, the cause of this fall can be directly attributed to foreign exchange rather than raw sales. And unfortunately foreign exchange rates may remain at a disadvantage throughout 2016, but that can't last forever. Polaris apparently has the products that consumers seem to continue to want and buy and when that happens, the fundamentals will eventually line up in the right direction. And when the dollar reverses, sales and profits will have the tail wind to push those earning up fast.
I intend to be entrenched in this stock when the environment changes and profits soar. Since this is an expensive stock I appreciate the fact that this next year may be difficult for this stock and I can therefore accumulate it at a relatively cheap price. Hopefully I'll be able to establish a relatively large position ahead of the move higher. I'll be buying, reinvesting, collecting dividends and hopefully selling options in this stock very soon.