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Polaris Industries Sales and Income Fell in 4Q15

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Price movement of Polaris Industries

Polaris Industries (PII) has a market cap of $4.6 billion. PII fell by 9.2% to close at $72.99 per share as of January 26, 2016. The price movement on a weekly, monthly, and year-to-date (or YTD) basis is -8.2%, -15.9%, and -15.1%, respectively.

Technically, the stock has broken its support and is trading below all moving day averages. Currently, PII is trading 11.9% below its 20-day moving average, 21.3% below its 50-day moving average, and 41.0% below its 200-day moving average.

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The VanEck Vectors Wide Moat Research ETF (MOAT) invests 3.6% of its holdings in Polaris. The ETF tracks an equal-weighted index of 20 companies that Morningstar determines to have the highest fair value among firms with a sustainable competitive advantage. The YTD price movement of MOAT is -6.9% as of January 26, 2016.

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.84% of its holdings in Polaris.

The market caps of Polaris’s competitors are as follows:

  • Textron (TXT): $9.0 billion
  • Harley-Davidson (HOG): $7.2 billion

Performance of Polaris Industries in 4Q15 and fiscal 2015

Polaris reported fiscal 4Q15 sales of $1,105.6 million, a fall of 13.3% compared to sales of $1,275.0 million in fiscal 4Q14. The company’s cost of sales as a percentage of sales rose by 1.4%, and gross profit margin fell by 2.8% in 4Q15 compared to 4Q14. Its net income and EPS (earnings per share) fell to $110.7 million and $1.66, respectively, in 4Q15, compared to $135.4 million and $1.98, respectively, in fiscal 4Q14.

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Fiscal 2015 results

In fiscal 2015, PII reported sales of $4,719.3 million, a rise of 5.4% YoY (year-over-year). The company’s gross profit rose by 1.5% in fiscal 2015 compared to fiscal 2014. Also, the company’s net income and EPS rose to $455.4 million and $6.75, respectively, in fiscal 2015, compared to $454.0 million and $6.65, respectively, in fiscal 2014.

Meanwhile, its cash and cash equivalents and inventories rose by 12.9% and 25.5%, respectively, in fiscal 2015. Its current ratio and debt-to-equity ratio rose to 1.39 and 1.42, respectively, in fiscal 2015, compared to 1.28 and 1.39, respectively, in fiscal 2014.

The company repurchased 427,000 shares of its common stock for $45.8 million, bringing its total share repurchases to 2,179,000 shares, or $293.6 million, for 2015.

On January 28, 2016, the company increased its regular quarterly cash dividend of $0.55 per share on its common stock. It also increased common stock repurchase authorization by 7.5 million shares.

Projections

The company has made the following projections for fiscal 2016:

  • sales in the range of -2% to 3%
  • EPS in the range of $6.20 to $6.80 per share due to weak industry trends in oil and gas regions of North America and volatility in the currency markets
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