Longbow Analysts Struggle To Find Growth Drivers For Polaris Industries

Longbow’s David S. Macgregor mentioned that dealer checks indicated weak ORV sales trends, along with ORV share losses, despite the August Factory Authorized Clearance sales event hosted by Polaris Industries Inc. PII.

Macgregor reiterated an Underperform rating on the company, with a $70 price target.

Sales Decline

ORV sales declined 5-7 percent in July and 6-8 percent in August, and despite the sales event, Polaris Industries appears to have lost market share in ORVs in July/August.

The analyst believes the mix shift to opening price point models, driven by a more price-conscious consumer, has also impacted the company, while slingshot sales continue to be challenges, declining 4-6 percent.

PG&A sales also declined 5-7 percent in July/August, with weak ORV sales adversely impacting the segment.

“RZR Turbo recall has yet to be resolved and competition is taking advantage by introducing new models in the high performance/margin SxS segment,” Macgregor stated.

Lack Of Growth Drivers

The analyst expects the company to post its Q3 2016 EPS below the consensus expectations, which could negatively impact the stock valuation.

“We struggle to find growth drivers for PII outside of the Indian brand, with Slingshot models that were supposed to offset weakness in ORVs/Snowmobiles not meeting dealer growth expectations,” Macgregor added.

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