Polaris Earnings Report: Q1 2018

2018 Polaris Ranger XP 1000 EPS

The new 2018 Polaris Ranger XP 1000 EPS helped drive ORV sales in the first quarter according to the latest Polaris earnings call.

Polaris Industries reported first quarter 2018 revenues fo $1,297 million, an increase of 12% from the prior year. Adjusted net income for the quarter ended March 31, 2018 was $69 million compared to $48 million in the 2017 first quarter. ORV/Snowmobile segment sales were up 15% in Q1 driven by improved ORV shipments of side-by-sides worldwide as demand accelerated during the quarter.(ORV includes UTVs and ATVs). The following are highlights of the Polaris earnings call related to the small, task-oriented vehicle market.

  • ORV/Snowmobile segment sales were up 15% in Q1 to $833 million driven by improved ORV shipments of side-by-sides worldwide as demand accelerated during the quarter
  • Average Selling Price of ORV was up 4%
  • First quarter North American (NA) retail sales were driven side-by-side sales
  • NA side-by-side sales were up high single digits %
  • Important oil and agriculture market areas are improving
  • Side-by-sides gained market share in Ranger and RZR brands despite less promotional spending
  • Ranger business grew both in units and in dollars faster than the RZR business
  • The RZR RS1 demand was slightly higher than anticipated but management is not ready to call it a “Grand Slam” product
  • Global Adjacent Markets (GAM) grew revenue by 20% to $113 million and is looking for a strategic acquisition. This segments includes commercial ORVs, Defense, GEM, Aixam, Taylor-Dunn and Goupil sales)
  • GAM vehicle sales increased 25% with strong performance from Aixam, Goupil and government/defense business, and PG&A sales increased 19%
  • International ORV/Snow sales increased 20%
  • GAM international sales increased by 32%
  • Polaris has the leading ORV market share outside of North America
  • Polaris increased its full year 2018 sales guidance to up 4% to 6%
    • ORV/Snow is expected to increase mid-single digits %
    • GAM is expected to increase high single digits %
  • Management addressed the latest recalls and stated that they were part of the process of improving their systems, working with the CPSC and identifying any previous outstanding thermal issues. Moving forward under the new systems in place management expects to see fewer recalls involving a smaller number of vehicles.

Learn more:  Seekingalpha.com (Polaris Earnings Call Transcript)

SVR’s Take:  This was another strong Polaris earnings report and the last large recall appears to be related more to the company’s previous issues than an ongoing or new problem. The company seems to be back on track with strong performance in both Ranger and RZR and introducing innovative new products like the RZR RS1. I’m curious to see what the GAM acquisition they referred to could be. After the failed Eicher-Polaris JV are they going to try to buy their way into the Southeast Asian STOV market as an alternative? In the past they have often acquired strong brands that could be grown with improved financial and engineering resources as well as expanded distribution. I previously speculated on the pros and cons of Garia as an acquisition target, which offers a luxury international brand and electric vehicles.

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