Wunderlich A Polaris Bull Into Earnings Despite Cautionary Statements

Wunderlich maintains its Buy rating on Polaris Industries Inc. PII shares despite expecting continued challenges in the fourth quarter.

Polaris plans to report its fourth quarter results and give initial 2017 guidance on January 24. The brokerage sees revenue of $1.02 billion and EPS of $1.19, relatively consistent with consensus expectations.

Bullish Justification

“We believe that, given recent supply chain challenges and sluggish end markets in ORV and bikes, management could likely be rather conservative with their initial 2017 guidance for revenue growth and earnings,” analyst Rommel Dionisio wrote in a note.

Polaris’ widespread product recalls in off-road vehicles (ORV) has not only resulted in negative publicity for the brand, but also has diminished available throughput to dealers, thus resulting in tight dealer inventory levels exiting 2016.

But, Dionisio is bullish on the stock, with a $98 price target, as it believes Polaris remains the industry leader in the more lucrative side-by-sides segment. As a result, tight dealer inventory bodes well for upcoming quarters given expected order levels for new 2017 models.

Competition

On the competitive front, the analyst hopes there is a window of opportunity for Polaris to stabilize, or perhaps even regain, market share in side-by-sides, once it can step up throughput of 2017 models into dealerships.

Shares of Polaris closed Friday’s regular trading session at $86.32.