Polaris Industries (PII) crushed first-quarter estimates early Tuesday while it eyes a shift to electric vehicles. But PII stock fell as higher guidance suggested limited upside for the rest of the year.
But the maker of motorcycles and off-road vehicles faces questions about its ability to meet demand and sustain growth following a boom in outdoor adventuring during the coronavirus pandemic.
Estimates: Wall Street expected Polaris earnings to rocket 609% higher to $1.56. Revenue was seen jumping 31% to $1.84 billion.
Results: Polaris earnings leapt 945% to $2.30 a share as revenue revved up 38% to $1.95 billion. Sales of off-road vehicles and snowmobiles jumped 50% to $1.23 billion. Motorcycle sales climbed 31% to 165.6 million. Aftermarket sales grew 14% to $229.8 million, and boat sales increased 29% to $198.7 million. “Adjacent markets,” which include apparel, saw sales rise 27% to $124.8 million.
Outlook: Polaris now sees 2021 EPS of $9-$9.25 vs. its old target of $8.45-$8.75. The new midpoint of $9.125 is up 52.5 cents, but Polaris earnings just beat views by 66 cents. The company expects revenue to reach $8.3 billion-$8.5 billion vs. its previous forecast of $7.95 billion-$8.15 billion. Analysts see full-year EPS of $8.77 on revenue of $8.11 billion.
Stock: Shares fell 1.15% to 143.25 on the stock market today after tumbling to 136.95 soon after the open. PII stock has a 94 Composite Rating and an 86 EPS Rating, which gauges profit growth.
Polaris is on IBD Leaderboard.
Polaris stock has run steadily higher since last spring, when fears of the pandemic sank markets. But shares are still short of the highs reached in 2015.
Motorcycle rival Harley-Davidson (HOG), which also makes the electric LiveWire, rose just over 2% Tuesday. And Textron (TXT), parent of Arctic Car, added 0.5%.
Polaris makes ATVs, snowmobiles, motorcycles, boats and vehicles like people movers and others that assist in light hauling. In an investor presentation last month, Polaris noted an “increased interest in the outdoors.” It said it gained around 700,000 new customers last year.
Polaris plans to offer an electric-vehicle option in each of its main segments by 2025. The company in September announced a 10-year partnership with Zero Motorcycles to make electric vehicles. A new Polaris Ranger vehicle, using new technology via its arrangement with Zero, will come out in December, according to Popular Science.
In March, Polaris also said it would partner with Optimus Ride to create autonomous low-speed vehicles.
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Constrained Inventory Looms Over PII Stock
Sales fell during the first half of last year. But they rebounded in the second half. During Polaris’ fourth quarter, sales rose 24% to $2.16 billion. Executives, when Polaris reported those results in January, noted the “unprecedented levels of growth as consumers continue to turn to powersports as a socially distanced outdoor activity.”
Wedbush analyst James Hardiman, who covers PII stock, said in a research note this month said that dealers expected elevated demand to continue through the year.
However, he said investors “are likely to focus more so on the sustainability of the torrid retail trends than any recent accomplishments.” But Hardiman also said the vehicle maker faces potential difficulties surrounding limited inventory.
“Our dealer contacts reported that trends picked back up in March (from a relative lull in February) as weather improved vs. February, consumers received stimulus checks, and many looked to get a jump on the season by buying earlier than normal given limited availability,” he wrote.
But dealers, he said, say many items are being pre-sold before they arrive on premise or are “selling almost immediately when hitting the showroom floor.”
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