Polaris Q4 2017 Earnings

2018 Polaris Ranger XP 1000 EPS

The 2018 Polaris Ranger XP 1000 EPS helped drive sales for the quarter and the year.

Polaris Industries reported quarterly revenue of $1.431 billion and annual revenue of $5.429 billion, representing increases of 18% and 20% respectively compared to last year. Adjusted earnings per share for the quarter increased 25% driven by higher volume, lower promotional spend and operating expense leverage. For the year a 39% increase in earnings per share was driven by a combination of increased volume, an improvement in gross margins and a lower tax rate.

The following are highlights of the earnings call related to small, task-oriented vehicles.

  • ORV sales increased 14% in Q4 and 9% for the year
  • Average ORV selling price was up 4% for the quarter
  • ORV retail was up for the year but down for the 4th quarter as retail unit sales of Off-Road Vehicles were down just under 1%
  • Ranger sales were up for the quarter with strong demand for the new Ranger XP 1000 lineup
  • RZR sales declined for the quarter driven by “tapped demand and limited product availability”
  • For the quarter the ramp up of Ranger and RZR production was slower than expected in part attributed to the new quality initiative. This manifested as a production issue with a four-wheel drive component on the Ranger XP 1000, which was originally not up to the company’s quality standard.
  • Continued roll out RFM inventory and ordering system for side-by-sides and should be fully optimized by the second quarter
  • North American industry side-by-side growth was strong in Q4 but ATVs down.
  • Utility side of ORV is expected to grow but there is stiff competition on the RZR side which will not grow as much as competition increases
  • Agriculture markets were down in the fourth quarter and oil markets were up slightly, but there was no “substantial shift” in buying patterns.
  • In the side-by-side market decreased pricing is offset somewhat by decreased promotional costs and there is some commodity pricing pressures
  • Australia was a strong market as buyers switch from ATVs to UTVs
  • Global Adjacent Markets sales increased 19% in the fourth quarter, driven by strong growth in Aixam and Goupil, as well as continued strong sales growth in Government and Defense
  • For the year Global Adjacent Markets revenue reached almost $400 million including PG&A
  • Average selling price for Adjacent Markets increasing 14% for the quarter
  • For the full year Global Adjacent Markets sales increased 16% with all business lines growing
  • In Europe there is strong demand for small, inner-city delivery vehicles including electrics and that demand is increasing in the US as well
  • “More autonomous activities with both the military and Taylor-Dunn platforms than anywhere else in the company”

Guidance for 2018

  • Total company sales are expected to be up in the range of 3% to 5% with ORV market expected to be up
  • ORV market share is expected to be stable with continued momentum from Ranger and General product lines
  • ORV/Snowmobile sales are expected to be up low to mid-single digits with Snow about flat and ORV and PG&A sales up
  • Global Adjacent Markets sales are expected to be up mid single-digit percent with growth expected in all businesses.
  • The new long-term strategic targets for the company as a whole are 5% compounded annual growth rate for revenues and 15% for earnings
  • Management will be focusing on cost leadership more while maintaining innovation

Learn more:  Seekingalpha.com (Earnings Call Transcript)

Polaris Recall Issues with RZR 900 & 1000 Models Persists

2016 Polaris RZR 900 EPS

The 2016 Polaris RZR 900 EPS is one of a number of previously recalled models still experiencing issues despite being repaired.

Polaris continues to have recall issues related to their RZR 900 and 1000 which were previously recalled. According to a joint statement issued by CPSC and Polaris, some vehicles that had been repaired under the recall are still experiencing fires. In addition 2017 RZRs not included in the recall are experiencing fires as well. The original recall was initiated in April 2016  and covered model year 2013 – 2014 RZR XP 900, 2014 – 2016 RZR XP 1000, 2015 – 2016 RZR 900 & S 900, and 2016 RZR S 1000 vehicles. The recall involved approximately 133,000 vehicles.

Polaris can’t seem to shake their recall issues. According to management they have put additional manpower and resources into addressing the issue in a systematic way to improve product development, quality control and issue tracking. What is not known is if these issues are related to previous systemic problems before new processes and people were put into place or if they show that problems still persists after the changes were made, which would be more worrisome. SVR has been tracking recalls from Polaris and other manufacturers.

The following is the joint statement from the CPSC and Polaris.

12/19/2017 10:54:00 AM
Joint Statement of CPSC and Polaris on Polaris RZR 900 and 1000 Recreational Off-Highway Vehicles (ROVs)
Minneapolis, MN (December 19, 2017) – The US Consumer Product Safety Commission and Polaris are informing the public about fires on model year 2013–2017 Polaris RZR 900 and 1000 Recreational Off-Highway Vehicles (ROVs). These fires have caused death, serious injuries, and property damage.

Most of these vehicles were voluntarily recalled by Polaris in April 2016 to address fire hazards (https://www.cpsc.gov/Recalls/2016/polaris-recalls-rzr-recreational-off-highway-vehicles-due).

However, users of the vehicles that were repaired as part of the April 2016 recall continue to report fires, including total-loss fires. The 2017 RZRs were not included in the April 2016 recall, but these models have also experienced fires.

The CPSC and Polaris continue to work together to ensure fire risks in these vehicles are addressed. However, at this time, the CPSC and Polaris want to make the public aware of the fires involving these vehicles.

The CPSC advises consumers to report any fire or overheating-related incidents at: www.SaferProducts.gov or the CPSC Hotline at 1-800-638-2772.

BRP Reports Quarterly Earnings – FY2018 Q3

Can Am Defender Max

The Can Am Defender Max and the Defender line as a whole helped drive sales.

Maverick X3 X RS Turbo R

The Maverick X3 X RS Turbo R and other X# models have helped drive sales as well.

BRP reported third quarter earnings for fiscal year 2018 of $1,241million ($C), a 15% increase from last year. Sales were driven by their Year-Round Products division which includes side-by-sides and Seasonal Products division which includes snowmobiles. For the quarter, Year-Round Products revenue increased $77 million or 20.1% to $460.9 million mainly on higher volume of Maverick X3 and the newly launched Maverick Trail.

The following are highlights of the earnings call related to the side-by-side market.

  • Side-by-side retail increased low 30% compared to an industry up high single digits
  • Launched the new 50″ wide Maverick Trail marking entry into the trail segment
  • Announced investment to increase their manufacturing capabilities in Mexico in response to ongoing strong demand for Defender and X3 models
  • North America side-by-side industry up low teen percent for the first third of the model year
  • Can-Am’s international side-by-side retail sales were up 80% for the quarter and the Defender and Maverick MAX models grew over 100% in markets like Mexico, China and Europe
  • The management stated that they did not follow some of their competitors who were aggressive with promotions in the quarter
  • The Defender line continues to make inroads into the farm and rural markets
  • Commander sales are flat to low single digit growth and the company has lost market share in that segment but gained share in the overall market
  • The management believes that better and more feature rich products across the industry are helping to drive replacement of older vehicles

Learn more:  Finance.yahoo.com (Earnings call transcript)

This marks another strong quarter for BRP as they continue to gain market share in the side-by-side market. Management expects to continue to follow their plan of adding new models every six months until 2020. The overall market appears to remain steady and strong with solid growth.

Marc Cesare, Smallvehicleresource.com

Textron Q3 2017 Earnings Report

Textron Off Road Wildcat X LTD

The 2018 Wildcat X LTD now under the Textron Off Road brand rather than Arctic Cat.

Textron reported third quarter revenues of $3.5 billion, up 7.2% from the third quarter 2016, while profit decreased $15 million for the quarter to $295 million. “Growth in the third quarter was the result of strong commercial demand at Bell, increased deliveries at Textron Systems and higher revenues at Industrial due to the acquisition of Arctic Cat,” said Textron Chairman and CEO Scott C. Donnelly.

Textron has folded Arctic Cat into their Specialized Vehicles division which also includes E-Z-GO, Cushman and other brands. They recently merged their Stampede, Bad Boy Off Road and Arctic Cat lines under the Textron Off Road brand. This includes a pared down lineup of previous Arctic Cat models and the introduction of Bad Boy electric vehicles under the Prowler model name. The following are highlights from the earnings call that relate to STOV vehicles.

  • Management reports putting a lot of resources into the integration of Arctic Cat and the process is proceeding on plan
  • The plan involved moving dirt manufacturing to Thief River and centralizing engine manufacturing in St. Cloud, as well as, clearing dealer inventory and educating them about the new lineup of vehicles under the Textron Off Road brand
  • The launch of the lithium ion battery powered golf products has gone “extremely well”
  • Side-by-side sales year over year did well, in part from clearing out inventory
  • Management reports good uptake by dealers of non-Arctic Cat products such as the Stampede and the recently announced Prowler EVs

Learn more:  Seekingalpha.com (Earnings call transcript)

Polaris Q3 2017 Earnings Report

2018 Polaris Ranger XP 1000 EPS

The new 2018 Polaris Ranger XP 1000 EPS helped drive sales in the third quarter for Polaris.

Polaris Industries reported third quarter 2017 sales of $1,478.7 million, up 25 percent from $1,185.1 million for the third quarter of 2016. Off-Road/Snowmobile segment reported sales of $1.01 billion up 12% and Global Adjacent Markets, which includes GEM, Taylor-Dunn and Aixam among other brands, increased 17% to $91.5 million.

It was a strong quarter for Polaris, in part, because it is being compared to a weak third quarter in 2016 and aided by higher promotional spending. On the other hand, management reports that the quarter also compared favorably to their 2015 third quarter, which was the last quarter before recall issues hit them hard. Looking behind the numbers a more accurate description may be a solid quarter that shows Polaris has stemmed the tide and gaining momentum again in the side-by-side and ATV markets. The following are highlights from the earnings call related to side-by-sides and other small, task-oriented vehicles.

  • Side-by-side wholesale sales were strong worldwide
  • ORV retail sales in North America were up mid-teens percent with both side-by-sides and ATVs up mid-teens
  • Management reports gaining market share in RZR, Ranger and ATV segments
  • ORV industry sales in North America increased high single digits percent for the quarter
  • The oil & gas and farm markets improved but are neither a drag or driving industry growth
  • ORV retail was up double digits in September as momentum carried through the quarter
  • RZR retail sales were very strong in the quarter as well as ATV sales
  • The Ranger XP 1000 was launched during the quarter
  • Strong promotional spending helped drive sales during the quarter but Polaris performed well relative to other manufacturers with similar spending.
  • Promotional spending was also used to help clear out inventory before new model year arrivals.
  • Management reports strong dealer orders for the Ranger XP 1000 and the RZR Dynamics products
  • In Europe Aixam quadricycles and Goupil light utility vehicles grew 17% for the quarter at the wholesale level
  • Guidance:
    • Total company sales are expected to be up in the range of 18% to 19% with increased guidance for ORV/Snowmobile sales, which are now expected to increase in the mid-single digit range year-over-year
    • Global Adjacent Markets guidance is increased to low double digits due to strong sales across the portfolio
    • Lower promotional spending is expected in the 4th quarter compared to previous year and quarter

Learn more:  Seekingalpha.com (Earnings call transcript)

Marc Cesare, Smallvehicleresource.com

Caterpillar Partners with Textron Specialized Vehicles for UTVs

Cushman Hauler 1200

Textron Specialized Vehicles, which makes utility vehicles like the Cushman Hauler 1200, is partnering with Caterpillar to manufacturer CAT branded UTVs.

Caterpillar, the world’s leading manufacturer of construction and mining equipment, diesel and natural gas engines, industrial gas turbines and diesel-electric locomotives, has entered into a manufacturing and supply agreement with Textron Specialized Vehicles to develop CAT branded utility vehicles.

The CAT utility vehicles will feature a steel cargo bed with a 1,000 lb. capacity and be able to tow up to 2,000 lbs. According to Cat product manager Steve Schoening, “Cat utility vehicles will offer exceptional performance and stability at full load, superior reliability, and a quiet, spacious operator environment”. There will also be ample headroom and legroom for tall operators.

Those specs are similar to the Cushman Hauler 1200 and Hauler 4×4 Diesel although the Haulers have slightly more cargo bed capacity by significantly less towing capacity. Caterpillar has 49 independent dealers in the US and another 123 worldwide. The CAT UTV will be available in 2018.

This is another example of utility vehicle manufacturers expanding their distribution through partnerships to reach additional market segments or geographic areas. Textron Speciality Vehicles has their Cushman product line that touches on the construction equipment market segment, but Caterpillar’s brand and dealer network provides access to the heart of heavy equipment markets. The partnership also helps increase production volume for Textron that can further reduce their manufacturing costs. For Caterpillar the partnership provides an easy add-on to their product line for a type of vehicle that many of their heavy equipment customers are likely already buying, but from other brands. In addition, they do not have to spend as much non-monetary resources developing and producing a type of vehicle that is not core to their mission or expertise. Learn more:  Constructionequipment.com

Marc Cesare, SmallVehicleResource.com

BRP Announces FY18 Q2 Quarterly Results

Maverick X3 X RS Turbo R

The Maverick X3 X RS Turbo R helped drive strong sales in the second quarter.

BRP, manufacturer of Can-Am products, recently announced their financial results for the second quarter of their 2018 fiscal year which ended July 31, 2017. (All dollar amounts are in Canadian dollars.) Revenues increased 20% for the quarter to $1,027 million driven by strong demand in side-by-side and personal watercraft. Net income increased $168.9 million to $100.1 million.

It was a strong quarter for BRP and they continue to make solid gains in the UTV market and continue to take market share. The Defender line continues to meet with success on a quarter to quarter basis. The company has built out their dealer network and are looking to improve dealer performance. Look for them to introduce additional models on a regular basis.

The following are additional highlights from the earnings call and presentation that relate to the utility vehicle market.

  • Company introduced the 172hp Can-Am Maverick X3 Turbo R model during the quarter
  • North American retail sales for side-by-sides increased 50% for the quarter in an industry that grew low teens %.
  • North American ATV retail sales grew high teen % in an industry that grew low single digit %.
  • For side-by-side model year ending June 30, Can-Am retail sales grew mid-thirties % in an industry up mid-single digit %.
  • The X3 and the Defender line are particularly strong performers.
  • Side-by-side sales are driving parts, accessories and clothing revenue hire
  • Management is seeing results from improving dealer performance and is concentrating on that area rather than looking to add new dealers. Nearly 300 dealers were added in the last four years.
  • Side-by-side sales outside of North America are very strong as well.
  • Management reports that promotional activity in the ATV and side-by-side market is high with many new models being introduced and OEMs looking to reduce inventory.

Eicher Polaris Changes Multix Marketing Strategy

Eicher Polaris Multix

The Multix utility vehicle, the first offering from the Eicher-Polaris joint venture.

Eicher Polaris has made a significant change in the marketing strategy for their Multix multi-purpose utility vehicle. Launched in 2015, the Multix was designed to be versatile and transformable from moving goods to carrying the family to generating electricity with the X-Port feature.

Based on extensive market research the original marketing plan targeted entrepreneurs in rural areas and small towns. The entrepreneur could use the vehicle for business during the week, for family outings on the weekend and even provide electricity in areas where the electrical grid can be unreliable. However, the product has not taken off as management expected, although the potential market is deemed quite large. The company points to more conservative rural people not being as quick to adopt such an innovative product.

Therefore, Eicher Polaris is changing course and now focusing on more urban areas. To that end the company is expanding from 77 to 100 dealerships with most of the new openings in metro areas. The hope is that metro locations will provide more exposure for the Multix to a wider range of end users in the urban environment. Management provides examples of end users that can conduct “business on wheels” with the Multix like laundry operators who can use the X-Port for ironing and carpenters to power tools.

Learn more: thehindubusinessline.com

Comment: The versatility of the vehicle may make it a success in the end. In the metro areas, rather than fitting the vehicle to a particular type of user, many different type of users can adapt the Multix to their needs. In the end the Multix may be used for a number of different end use applications that the company never even considered when developing the vehicle. The key will be exposing the vehicle to as many different end users as possible, and helping them adapt the vehicle to their needs. The next step may be to develop a broader range of accessories to cater to specific applciations.

Marc Cesare, Smallvehicleresource.com

Polaris Industries Q2 2017 Earnings Results

RZR XP 4 Turbo EPS

RZR sales showed improvement in the quarter compared to the prior year results hurt by recall issues.

Polaris Industries recently announced their quarterly earnings results for the second quarter of the 2017 fiscal year. The quarter ended June 30, 2017. Management reported second quarter sales of $1,364.9 million, up 21% from second quarter 2016. Net income for the quarter was $62.0 million compared to $71.2 the prior year, and included some one-time expenses.

The following are some of the highlights of the earnings call related to small, task-oriented vehicles:

  • ORV sales increased 6% for the quarter
  • North American ORV unit retail sales for the second quarter of 2017 were down low-single digits percent from the 2016 second quarter as UTV sales increased low single digits but ATVs sale declined high single digits in a weak ATV market
  • Polaris ATVs lost market share in a heavy promotional environment
  • RZR retail turned positive while Ranger retail was flat for the quarter in a highly competitive segment with significant promotional activity
  • The General UTV product line has been good and the segment offers good opportunities according to management
  • Agriculture markets remain weak while oil markets are improving
  • Global Adjacent Markets segment sales increased 7% driven by the Work & Transportation group with good performances from Aixam quadricycles and Goupil light utility vehicles
  • Management expects Global Adjacent Market segment to increase mid-single digits percent for the year
  • Side-by-sides are expected to drive the improved guidance for the ORV/Snowmobile segment, which is now expected to see flat sales year-over-year

Learn more:  Seekingalpha.com (Earnings call transcript)

American LandMaster Announces New HQ & Manufacturing Facility

 American LandMaster LandStar LS670 utility vehicle

The LandStar LS670 from American LandMaster.

Utility vehicle manufacturer American LandMaster announced a new facility in Columbia City, IN that will become the company’s headquarters and consolidate manufacturing operations. The new facility will cost $4 million to lease and equip. Manufacturing operations from Roseland, LA and nearby Fort Wayne, IN will be moved to the new location. Nearly 70 jobs are expected to be created and production at the facility is scheduled to begin in September. The company can qualify for up to $420,00 in tax credits and another $70,000 in training grants from the Indiana Economic Development Corporation, based upon reaching certain employment targets. County officials are considering additional incentives.

The investment is another sign of the increasingly competitive utility vehicle market. A number of manufacturers across varied market segments have increased their investments in the market, while at the same time growth in the UTV market has moderated. Companies have introduced new product lines and, similar to American LandMaster expanded or developed new manufacturing facilities. Last April American Sportsworks announced the rebranding of the company as American LandMaster, as well as, a newly re-engineered vehicle lineup. According to management, the new facility will allow for greater efficiency, better customer service and product line expansion, while continuing to manufacture American made products.  Learn more:  Businessfacilities.com

Marc Cesare, Smallvehicleresource.com