Polaris Investments Yield Another Strong Quarter


Polaris remains one of the most-liked companies on the NYSE, and its evolution keeps investors guessing. Under the direction of a visionary management team, the company has invested in or paired with a wide range of adjacent businesses, including electric vehicles, work (Bobcat) and military products, and motorcycles. In our opinion, this semiorganic growth strengthens Polaris’ narrow moat as it leverages its brand equity across new products.

Polaris continued to execute through the difficult weather at the beginning of the quarter, as indicated by total sales rising 15%, with off-road vehicle sales increasing 7% and on-road vehicles sales rising 29%, while snowmobile sales declined 4% in its seasonally smallest quarter. Parts, garments, and accessories revenue grew 33%, helped by the recent acquisitions of Klim and Aixam; the press release noted that all categories within PG&A experienced doubledigit growth.

Despite higher promotional and warranty costs, operational excellence prevailed, and the gross profit margin leveraged to 29.9%, up 120 basis points year over year thanks to cost-reduction efforts, higher selling prices, and more PG&A sales. Operating expenses, however, rose year over year as the company increased marketing dollars in preparation for the new Indian launch next weekend and spent to integrate Aixam.

Management raised its full-year guidance and now expects earnings per share of $5.20-$5.30 (growth of 18%-20%), up from its original January guidance of $4.85-$5.05 (this is the second time Polaris has raised guidance this year). In our opinion, this goal is achievable thanks to recent acquisitions and the team’s continued focus on lean initiatives helping the top and bottom lines. Polaris has shown no indication of slowing down, and barring a major economic catastrophe, we believe it will continue to offer some of the most-demanded products in the motorsports industry, protecting its share and profits over the long term.


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