Polaris Q2 2020 Earnings

Polaris General 4 1000 utility vehicle
Four-passenger UTVs like the Polaris General 4 1000 helped drive retail sales despite the pandemic.

Polaris Q2 2020 Earnings summary

Polaris recently reported their financial results for fiscal year 2020 2nd quarter and they were better than expected. The company reported sales of $1.512 billion for the quarter, a decrease of 15% year over year. Adjusted income decreased 25% from $107 to $81 million. Management stated that results “significantly outpaced company expectations” in the face of the pandemic. In the ORV/Snow segment sales were $953 million, a decrease of 9% year over year with ORV decreasing 14%. The powersports industry experienced strong retail sales, especially in off-road vehicles. Management attributed the strong sales to people seeking family enjoyment, having more free time and fewer alternatives for spending money because of the pandemic.

Polaris Q2 2020 Earnings Highlights

The following are highlights from the earnings call that relate to the small task-oriented vehicle market.

  • NA powersports industry retail was up high 30% in Q2
  • Polaris off-road vehicle retail increased low 60% as side-by-side and ATV sales were both strong.
  • New customers were key drivers with more females, people of color, families and younger buyers
  • Management reported that 75% of their off-road vehicle and motorcycle buyers in Q2 were new to Polaris.
  • Solid demand for four seat and crew UTVs for family usage
  • A significant portion of ORV sales came from existing dealer inventory which decreased 45% in the quarter as Polaris shutdown or decreased plant production
  • Production is “chasing demand with some shortage”.
  • Japanese competitors are gaining share, in part, due to having more product available.
  • Global Adjacent Market sales decreased 36% for the quarter to $78 million from $122 million
  • ORV retail sales continued strong growth in July

Guidance for 2nd Half

  • Polaris retail sales anticipated to outpace overall market.
  • Strong performance in second half expected by ORV.
  • ORV/Snow sales down 7% for the first half of the year but expected to be up overall for the full year as dealer inventory is replenished and powersports demand maintains modest growth.
  • Management anticipates continued weakness in adjacent markets given the dependence on government, university, commercial and rental sales.

Learn more: Polaris Q2 2020 Earnings Call Transcript

SVR’s Take

The fallout from the pandemic appears to have been good for the off-road utility vehicle market, at least for recreational purposes. As a relatively safe activity in terms of avoiding the virus, riding UTVs appears to have provided an antidote to being in lockdown or some degree of it. It will be interesting to see if it continues to do so. They are still large purchases and with the virus flaring up in many places, potential buyers could become more cautious. However, the acquisition of a large portion of new customers to date bodes well for Polaris in the future. Marc Cesare, Smallvehicleresource.com

2020 Small Task-Oriented Vehicle Study

Club Car Onward 4-passenger lifted PTV
Club Car Onward 4-passenger lifted PTV

In a new market study on the small task-oriented vehicle (STOV) market in the US and Canada, Small Vehicle Resource (SVR), LLC describes an industry in midstream transition as:

  • Climate policies, COVID-19 effects and new technologies usher in the urban/suburban mobility market and underpin an expanding consumer market for personal transportation vehicles (PTVs), as well as commercial markets for light duty utility vehicles;
  • The transition from lead acid to lithium batteries continues, raising performance and transforming vehicle longevity and recycling value.
  • The maturing off-road utility and recreational UTV market remains fundamentally strong and highly competitive, and is poised to follow the automobile and golf-car type vehicle markets into electrification;

The study provides a strategic analysis of the rise of urban/suburban mobility market driven in the context of the STOV industry. Steve Metzger, SVR Managing Director, states that, “The intersection of climate policy, new technologies and COVID-19 effects will lead to a ‘dispersed living lifestyle’, and provide new opportunities in the urban/suburban mobility market.”  He further remarks, “The STOV industry, particularly the Big Three golf manufacturers with a foothold in gated communities, have the core competencies to transition from golf-centric to urban/suburban centric. The question is will they?” 

Marc Cesare, SVR Managing Director, adds that, “While the UTV manufacturers will see solid growth in their market, some are capable of pursuing the urban/suburban mobility market as well. However, their DNA, profit centers and distribution channels are primarily off-road and powersports. Culturally, the pursuit of the urban/suburban mobility opportunity may be a difficult paradigm shift.”

The study, the tenth in the series since 2000, covers market trends from 2016 and develops projections to 2025. The key segments are golf fleet, personal transportation vehicles, light-duty utility vehicles, and off-road utility and recreation vehicles. In total, these segments are forecasted to reach close to 1,200,000 new vehicles in 2025. Electric powered vehicles continue to make inroads. Approximately a third of the market is electric powered, primarily in the form of fleet golf cars, PTVs, as well as light duty utility vehicles, of which approximately 80% will be electric by 2025. Key trends and projections for the market include:

  • Demand for electric powered STOV vehicles will increase to over 450,000 vehicles in 2025.
  • Golf course fleet demand will decline slightly during the trend period but will remain overwhelmingly electric powered, around 80%.
  • Demand for PTVs will be strong.
  • Lithium battery powered vehicles will continue to make inroads as more models become available with this option.

            The study is entitled, Trends and Outlook for Small, Task-Oriented Vehicles-2016-2025- An Analysis of the Emerging Urban/Suburban Mobility Market.  For additional, detailed information see the study brochure with table of contents or contact:

Steve Metzger smetzger@smallvehicleresource.com

(914) 293-7577

Multiple Polaris Recalls

Polaris Ranger XP 1000 utility vehicle
Models like the Polaris Ranger XP 1000 that helped drive sales is part of a large recall.

In April Polaris announced three recalls, two involving Ranger XP 1000 utility vehicles and one related to the PRO XD and several Ranger models. The largest recall covers 80,000 model year 2018 to 2020 Ranger XP 1000 and Crew XP 1000 utility vehicles. The clutch belt can break and damage the secondary clutch and fuel line and create a potential fire hazard. The second recall covers model year 2019 and 2020 Ranger XP 1000 and Crew XP 1000 and involves 7,000 vehicles. The fuel line can be misrouted above the bracket that protects the fuel line from a clutch belt failure, posing a fire hazard. The final recall involves model year 2019 PRO XD and several model year 2020 Ranger vehicles. The seat belts on the vehicles can fail, posing an injury hazard in certain crash situations. The following details are from Consumer Product Safety Commission.

Recall Details

Recall 1Recall 2Recall 3
Models
2018 Ranger XP 1000
EPS
2019 & 2020 Ranger XP 1000 & Crew XP 1000
Models
2019 Ranger XP 1000
EPS & Crew XP 1000
EPS
2020 Ranger XP 1000 & Crew XP 1000
Models
2019 PRO XD 4000D
AWD
2020 Ranger 500, 570, 1000, Crew 570, Crew XP 1000, EV, XP 1000
The clutch belt can
break and damage the secondary clutch and the fuel line, posing a fire hazard to the rider
The fuel line can be
misrouted above the bracket that protects
the fuel line from a
clutch belt failure,
posing a fire hazard 
The seat belts on the vehicles can fail, posing an injury hazard to the user if they were to be in a collision or tip-over incident.
Consumers should
immediately stop using the recalled vehicles and contact a Polaris dealer for a free inspection & repair.
Consumers should
immediately stop using the recalled vehicles and contact a Polaris dealer for a free inspection & repair. 
Consumers should
immediately stop using the recalled vehicles and contact a Polaris dealer for a free inspection & repair. 
80,000 UTVs recalled7,000 UTVs recalled10,500 UTVs recalled
See CPSC for affected
VIN information
See CPSC for affected
VIN information
See CPSC for more details
Recall number:
20-733
Recall number:
20-734
Recall number:
20-735
Sold Oct. 2016 –
Oct. 2019
Sold Aug. 2019 – Dec. 2019Sold Oct. 2019 – Dec. 2019

Polaris is notifying dealers and contacting registered owners directly. Consumers can contact Polaris at 800-765-2747 from 7 a.m. to 7 p.m. CT Monday through Friday or online at www.polaris.com and click on “Off Road Safety Recalls” for more information. In addition, check your vehicle identification number (VIN) on the “Product Safety Recalls” page to see if your vehicle is included in any recalls.

SVR’s Take

Polaris appeared to have improved their quality and significantly alleviated their recall problems before this latest round. The Ranger XP 1000 is a very important vehicle for their Ranger business and an 80,000 vehicle recall is very large. This will only add to the difficulties of dealing with the pandemic. SVR tracks industry recalls on an ongoing basis.

Polaris Covid-19 Response

Polaris PRO XD 400D AWD utility Vehicle
Sales of the new PRO XD 400D AWD from Polaris Commercial is likely feeling the effects of the Covid-19 crisis.

Polaris Covid-19: Operations & Dealer Response

The Polaris Covid-19 response is wide ranging and impactful. The management is suspending operations at eight plants across the United States, Mexico and Poland for a week. As part of the suspension the company is providing US employees with up to 10 days of pay. For dealers, they are allowing home delivery of products, providing product flooring support and covering flooring interest payments for off-road vehicles and motorcycles through May 31st.

Polaris Covid-19: Financial Response

On the financial side Polaris management announced a:

  • Drawing down of cash from their revolving credit facility
  • Reduction in capital expenditures
  • Suspension of share repurchases.

They have also withdrawn their financial guidance for the first quarter and full year.

SVR’s Take

This is not surprising given the current economic conditions brought on by the Covid virus. Similarly, BRP, maker of Can-Am products, withdrew their financial guidance for the year, suspended their dividend and drew down their $700 million revolving credit line. They are also considering reducing shifts and possibly suspending some plant operations.

Since the powersports industry in general is reliant on discretionary income, particularly in the recreational segment, they will be hard hit by the economic fallout from the Covid-19 virus. Polaris is more diversified than BRP with more commercial customers and products like Taylor-Dunn, Goupil, GEM and military vehicles. In addition, they have a large installed base and customers may choose to fix existing vehicles rather than purchase new ones. On the bright side Polaris points to the ability to maintain social distancing while still enjoying off-road vehicles.

Furthermore, the companies will be hit by sharply lower oil prices in important oil producing states and farmers still feeling the effects of the tariff wars. Several years ago these two sub-segments helped restrain growth in the side-by-side market. Oil prices were lower but not quite this low and farm income was low as well.

Marc Cesare, Smallvehicleresource.com

Polaris Earnings Call: Strong Annual Sales; Low 4Q Growth

Polaris Ranger XP 1000 utility vehicle
Models like the Polaris Ranger XP 1000 helped drive ORV sales.

Polaris Earnings Overview

In their recent earnings call Polaris management reported strong annual sales despite relatively low fourth quarter growth. Overall sales increased to $6.78 billion for the full year, an increase of 12% from last year. All segments grew with the ORV/Snow segment increasing by 7%. For the fourth quarter sales increased 7% to $1.74 billion despite North American powersports retail sales increasing by only 2%.  There was strength in Ranger/General side-by-sides, full-size ATVs and Indian Motorcycles unit sales. In addition, PG&A sales outside of the TAP business performed very well, up 22%. The company continues to be hampered somewhat by tariffs, a $90 million cost in FY2019. However, the management has been able to receive some exemptions and managed to pass some of the cost on to suppliers.

Polaris Earnings Call

The following are highlights related to small, task-oriented vehicles from the recent Polaris earnings call for fiscal year 2019 fourth quarter.

  • ORV segment (UTVs & ATVs) sales increased by 13%
  • ORV retail increased mid-single digits %
  • Side-by-sides retail up low single digits percent
  • ATV retail up mid-single digits
  • Management reports that the ramp up of 2020 side-by-side retail sales were slightly below expectations and dealer inventory increased as a result
  • They named a top executive from their ORV business head-up their electrification strategy
  • Company-wide average selling price (ASP) jumped by 8% on the strength of ORV and motorcycles
  • ORV ASP increased 10% with more unit sales and more side-by-side sales
  • The company boosted prices 3% to 3.5% on many models earlier in the year
  • Recently they reduced prices substantially on select RZR models
  • Global Adjacent Markets decreased 1% to $120 million with vehicle sales declining but PG&A increasing

Full Year Sales Guidance

  • Full year sales are expected to improve 2% to 4%
  • ORV/Snow segment is expected to increase low single digits percent with ORV up low single digits percent
  • The Global Adjacent Markets segment is expected to increase high single digits percent as all product lines should show growth
  • Side-by-side shipments to dealers should decline in the first quarter as management tries to reduce dealer inventory that increased slightly the last two quarters.

Learn more: Seekingalpha.com (Earnings call transcript)

SVR’s Take

One of the most interesting pieces of information coming out of the earnings call was the appointment of a Senior Vice President for electrification strategy. Management noted that the powersports industry tends to lag the auto industry by 5 – 10 years. They think there is currently an inflection point in the market with regards to electrification. In addition, they talked about making investments and see a need to become more competitive in their core powersports business as it relates to electrification.

While Ranger sales continued to drive growth, RZR sales were not as impressive. This is likely where the higher dealer inventory levels originated. The price reduction of some of their RZR S models is likely a reflection of increased competition in the market segment. Kawasaki and Honda are the last two entrants into the high performance segment which has now become quite crowded. In addition, Polaris lowered RZR XP Turbo prices. This reduction may be to remain competitive as well as an effort to create pricing differentiation between the XP Turbo and their higher priced Pro XP models.

Marc Cesare, Smallvehicleresource.com


Recent Polaris Recalls

Polaris Recalls Overview

The Consumer Product Safety Commission (CPSC) recently detailed recalls for two different Polaris UTVs, the Ranger EV and the 2019 RZR XP 4 Turbo S. The Ranger EV recall covers model years 2015 to 2019. Polaris previously announced the RZR XP 4 Turbo S in January, 2019 during the government shutdown.

Ranger EV Recall Details

Polaris Ranger EV electric UTV.
Polaris is recalling model year 2015 to 2019 Ranger EVs, their electric powered UTV.

According to the CPSC recall information an incorrectly wired chassis harness on the Ranger EV can cause a bad throttle control signal. As a result, there can be an unexpected acceleration. The recall involves approximately 3,900 vehicles sold from February 2014 through January 2019. The 2015 to 2019 model year vehicles were available in avalanche gray and pursuit camo. There have been eight reports of unexpected accelerations including one incident resulting in injuries. Accordingly, consumers should immediately stop using the vehicles and contact a Polaris dealer to schedule a free repair. In addition, Polaris is contacting registered owners directly.

RZR XP 4 Turbo S Recall Details

Polaris RZR XP 4 Turbo S high performance sport UTV
Polaris is recalling the 2019 RZR XP 4 Turbo S because of brake issues.

The Polaris RZR XP 4 Turbo S recall includes model year 2019 vehicles which were sold in blue and red. Potentially, the brakes can fail and cause a crash. To date, Polaris has received 11 reports of brake failures, resulting in one crash and one rollover incident. Accordingly, owners should immediately stop using the vehicles and contact a Polaris dealer to schedule a free repair. In addition, Polaris is contacting registered owners directly. The CPSC did not estimate how many vehicles are involved in the recall. Dealers sold the vehicles from December 2017 through January 2019.

Smallvehicleresource.com maintains a list of small, task-oriented vehicle recalls.

Tariffs Affect STOV Market

Polaris 2019 RZR S4 1000 EPS
Tariffs have hit Polaris, the manufacturer of UTVs like the 2019 RZR S4 1000 EPS shown here, hard.

Tariffs Hit Polaris Hard

In a recent interview with CNBC Polaris CEO Scott Wine commented on the affects of the tariffs on the company. He stated that the increase to 25% would be “catastrophic”. The company previously estimated  that they would cost the company $40 million in the last fiscal year. At the 10% tariff level they were guiding towards an approximately $90 million hit for the current fiscal year. However, at the 25% level that would jump to $195 to $200 million. In addition to these China specific tariffs, other aluminum and steel tariffs hurt the company as well.

Polaris More Exposed

Polaris is in a particularly tough spot with the tariffs because of their supply chain relative to the other major UTV manufacturers. The major Japanese OEMs, Yamaha, Honda and Kawasaki, mainly source their imported parts from Japan and thus avoid the onerous China tariffs. Can-Am produces products in Canada and Mexico and therefore, are less exposed to the tariff regime as well. Polaris on the other hand sources more of their components from China.

Farmer Segment Exposure

UTV manufacturers exposed to the farm segment are likely to suffer as well. Farmers report lower commodity prices and higher equipment prices. The tariffs are increasing farm equipment prices in the range of 20% according to some farmers. Although this refers to large pieces of farming equipment, if farmers are not spending on these large pieces and trying to cut costs in general, they are likely forgoing UTV purchases as well. John Deere and Kubota are likely the most effected brands as this is a strong segment for them. However, Can-Am could possibly be feeling an impact in their Defender line and Polaris in their Ranger line.

Some Value Brands Vulnerable

In the past few years value brands have made inroads at the lower end of the price scale. Many of these companies are sourcing parts or vehicles from China. For example, CFMOTO is based in China. In addition, Cub Cadet UTVs are manufactured by Hisun in China. Given their value pricing approach, the tariffs are likely putting some pressure on these companies. If they have to raise their prices too much, they lose their value proposition in relation to the major brands in the market.

Urban Mobility Market for STOV OEMs

fuel cell powered urban mobility vehicle
Yamaha’s fuel cell powered urban mobility vehicle for a new ride sharing service.

Recent vehicle news from Asia spurred some thoughts on the opportunity urban mobility presents to small, task-oriented vehicle (STOV) manufacturers.

Urban Mobility Changing

Battery Swapping Autorickshaws

The first article reports on the use of battery swapping to power electric autorickshaws in India. Battery swapping removes the very expensive battery component from the upfront purchase price and reduces long term operating costs. In addition, the electric part moves toward a more climate friendly and less polluting transportation system.

The current thinking by some is that smaller two and three-wheeled vehicles provide the best economic case for battery swapping. In contrast, larger vehicles require larger batteries. This means more expensive and complicated swapping stations, and higher up front investment costs for the battery supplier. While this an India based example, the advent of e-scooters, e-bikes and startups offering three wheelers indicate market potential in the US.

Fuel Cell Powered Small Vehicle

This week Yamaha Motor announced the public testing of a prototype fuel cell vehicle for a vehicle sharing service. The vehicle looks like less than a typical automobile but more than a golf car. The technology advances new concepts in urban mobility as well as initiatives in Japan to promote hydrogen based fueling. Though the fuel cell provides greater range and less refueling needs, the more important part of this test for STOV OEMs is the vehicle form. The vehicle size and level of complexity should be a good fit for their capabilities.

Is Urban Mobility Too Small for Traditional Auto OEMs?

These transportation technologies represent a new opportunity for STOV manufacturers to leverage their existing manufacturing and technology expertise into new vehicle markets. The traditional automobile manufacturers are less likely to view these markets as an opportunity. Although, in the long term they could represent a threat to their dominance or at least reduce their addressable market. They are already pouring billions of dollars to enter the highway capable EV market. However, they must balance investment between highly profitable and traditionally popular ICE vehicles and lower margin and riskier EVs. Smaller, alternative energy vehicles are even farther down the list. In addition, their work force arguably did not join their companies to produce small, urban vehicles.

Urban Mobility Attracts Diverse Providers

Entrants in the urban mobility space include startups like Arcimoto and traditional small vehicle manufacturers serving Asian and to a lesser degree European markets. Startups have the advantage of creating purpose-built vehicles specifically for new mobility markets. However, they lack the manufacturing expertise, financial resources and distribution networks. Traditional foreign small vehicle manufacturers know their home markets, and have the distribution, financing and manufacturing assets. However, they do not have a strong presence in the US market.

Other potential entrants include the likes of bike sharing companies as well as Lyft and Uber that have moved into ride sharing with e-scooters and e-bikes. However, these company’s expertise is not in manufacturing. They provide the platform for people to access mobility. One can argue that the platform itself does not provide as a wide moat as the manufacturing and technology assets. The strengths and weaknesses of these potential providers and the dynamics of the urban mobility market suggest an opening for existing US STOV manufacturers.

Best Positioned US STOV Market Leaders

Among the current leading UTV, golf car and LSV manufacturers companies Polaris, Textron and Yamaha appear to be best positioned to pursue this new opportunity. Polaris owns Aixam, the leading European quadricycle brand as well as the GEM, Goupil and Taylor-Dunn electric vehicle brands. These brands provide them with electric vehicle technology as well as a range of distribution networks. On the other hand, the DNA and profit driver of Polaris is off-road motorsports. They may see relatively greater returns on investment in their traditional markets.

After the acquisition of Arctic Cat, Textron is similar to Polaris and now has an expansive small vehicle portfolio. Their DNA is more golf car and PTV, and therefore likely better suited towards urban mobility. However, the integration of Arctic Cat has been bumpy and they were slow to recognize the original UTV opportunity. As a piece of a larger conglomerate, their Textron Specialized Vehicle division may not be entrepreneurial enough or have the freedom to pursue this opportunity.

Yamaha has both off-road and golf car type offerings as well as e-bikes, but are not well coordinated. These businesses are in separate business units. In addition, their golf car portfolio has been emphasizing gas powered technology rather than electric technology. Yamaha’s existing mobility concept testing along with having one foot in the Asian market and another in the US should be an advantage. However, their slow re-entry into the UTV market after problems with the Rhino side-by-side speaks to a more cautious corporate approach.

The STOV OEMs appear to have many of the necessary requirements to pursue the urban mobility opportunity. The question remains whether they believe in the opportunity and if they are willing to take the risk.

Marc Cesare, Smallvehicleresource.com

Should Polaris Acquire Club Car?

Club Car Tempo
The Tempo, Club Car’s fleet golf car introduced in 2018.

A recent article speculated that Ingersoll-Rand’s acquisition of Precision Flow Systems could pave the way breaking up the conglomerate. Club Car is one of the pieces that seems a poor fit with the rest of Ingersoll-Rand. If this is the case, then Polaris Industries might be a good suitor.

The Pros for Acquiring Club Car

A strong international brand

Club Car has a number of characteristics that match previous Polaris acquisitions. First, Club Car is a leading brand, if not, the leading brand of the three major golf car manufacturers. Second, it is an international brand. Third, Club Car participates, in part, in a fragmented industry. Therefore, Polaris would have an opportunity to use their resources to establish a more dominate market position. While the golf car fleet market is primarily a three company affair, Club Car, E-Z-GO and Yamaha, the non-fleet personal transportation vehicle (PTV) and light utility vehicle markets are more fragmented markets. Fourth, a large installed base of vehicles forms the basis for a substantial parts and accessories business. This was a key reason for the Polaris purchase of Taylor-Dunn.

Club Car complements Polaris vehicle portfolio

A large portion of Club Car vehicles sold are electric and would fit well with the Polaris EV portfolio. Other EVs in the Polaris portfolio include GEM, Goupil, Taylor-Dunn and Aixam. Polaris could spread their battery and EV powertrain development costs over a larger number of vehicles. In addition, Club Car’s end markets and distribution network would complement current efforts by Polaris. Their PTVs would complement the street legal GEM vehicles and their light utility vehicles would complement the more heavy-duty Rangers.

In addition, the golf manufacturer’s dealer network would expand Polaris’ footprint. While there is some overlap with the GEM and Taylor-Dunn dealer networks, there would also be a large number of additional dealer locations in the US and internationally. Furthermore, these dealers could be used to expand the GEM and Taylor-Dunn distribution. Club Car end markets such as golf courses, resorts, colleges, airports and other institutions would also take Polaris into new markets or broaden their vehicle offerings where they overlap.

The Cons for Acquiring Club Car

Is there enough growth?

Polaris looks for acquisitions in growing markets and/or traditionally strong but neglected brands that they can leverage. In the case of Club Car, the fleet golf car market has been declining for a number of years. The PTV and light UTV markets are growing but not at really high rates and are a smaller part of the business. Club Car isn’t necessarily a neglected brand but is somewhat lost among much larger Ingersoll-Rand businesses. In contrast, Polaris might be able to focus more attention and resources and make a strong brand even stronger.

Another acquisition to swallow

Polaris has already made a number of acquisitions in the past year, adding Boat Holdings and the Marquis-Larson Boat Group to start a new boating business. Acquiring Club Car would require more management time and focus to successfully integrate the business into Polaris. In addition, the purchase would likely add additional debt to their balance sheet. Polaris management might want to finish integrating their recent acquisitions before adding another piece and avoid increasing their debt.

What Will Polaris Do?

A strong argument could be made that Polaris should acquire Club Car if it’s for sale. The key questions are whether the management perceives if there is enough growth in the market, and do they think they can use their resources to drive more growth. The combination of the PTV and light UTV markets along with the parts and accessories business may offer enough potential. Timing may also be an issue. Any down turn in the economy, which some are predicting, would hurt Polaris. Discretionary income drives a significant portion of their sales.

Marc Cesare, Smallvehicleresource.com

Polaris Reports Another Strong Quarter

2019 Polaris Ranger Crew XP 1000 EPS
The 2019 Polaris Ranger Crew XP 1000 EPS in Sunset Red Metallic is part of the Ranger product line that recently commemorated its 20th anniversary.

Polaris Q4 2018 Earnings Overview

Polaris reported another strong quarter and full year with 4th quarter sales of $1.6 billion, up 14% from last year. Full year sales topped $6.1 billion, up 12% from the prior year. The ORV/Snowmobile segment reported sales of $1.1 billion for the quarter, an increase of 7% year over year. The ORV portion declined 2% as the company had a tough comparable with the prior year’s quarter. On a negative note, management expects tariff and trade war costs to total between $110 to $120 million company wide for fiscal year 2019. They will hit the ORV and Motorcycle businesses the hardest. A significant portion of the Q&A on the call revolved around tariff and trade war costs. A summary of the earnings call highlights related to the STOV market follow.

Polaris Earnings Call Highlights

  • Polaris side-by-side retail sales increased mid single digits % while ATV retail sales decreased mid single digits %
  • Average selling price for the ORV segment increased by 7% but were partially offset by tariff, logistics, and commodity costs
  • Polaris gained market share in the side-by-side market for the quarter and the full year
  • Management believes they are gaining share from Japanese competitors and Arctic Cat, now owned by Textron
  • Global Adjacent Markets revenue increased 4% to $122 million on the strength of commercial, government and defense and Aixam businesses.
  • Polaris increased wholegood prices 3.5% for the ORV/Snowmobile segment at the start of 2019 to counter tariff and trade costs
  • Revenue for ORV/Snowmobile and Global Adjacent Markets segments are expected to increase mid-single digits % for fiscal year 2019
  • Management does not expect to enter into electric powered markets until there is large consumer demand. Their response pertained to motorcycles but appears to be their general philosophy.

Learn more: Earnings Call Transcript (seeking alpha.com)