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Raymond James Downgrades Polaris Industries to ‘Market Perform’

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Price movement

Polaris Industries (PII) has a market cap of $5.5 billion. It fell by 0.59% to close at $87.59 per share on July 13, 2016. The stock’s weekly, monthly, and year-to-date (or YTD) price movements were 6.4%, 9.6%, and 3.2%, respectively, on the same day. PII is currently trading 5.9% above its 20-day moving average, 3.6% above its 50-day moving average, and 6.0% below its 200-day moving average.

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Related ETFs and peers

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 companies with a sustainable competitive advantage. The YTD price movement of MOAT was 16.4% on July 13.

The Vanguard S&P Mid-Cap 400 Growth ETF (IVOG) invests 0.84% of its holdings in Polaris. The ETF tracks a market-cap-weighted index of growth companies culled from the S&P 400.

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

  • Textron (TXT): $10.4 billion
  • Harley-Davidson (HOG): $9.0 billion

Polaris’s rating and updates

Raymond James has downgraded Polaris Industries’ rating to “market perform” from “strong buy.” Craig Scanlon has been named as Polaris’s chief marketing officer and will report to Scott W. Wine, Polaris’s chief executive officer and chairman.

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Polaris Industries’ performance in 1Q16

Polaris Industries reported 1Q16 sales of $983.0 million, a fall of 4.9% from the sales of $1.0 billion in 1Q15. Sales in the Motorcycles segment rose by 18.0%, and sales in the Off-Road Vehicles/Snowmobiles and Global Adjacent Markets segments fell by 9.5% and 4.5%, respectively, between 1Q15 and 1Q16. The company’s cost of sales as a percentage of sales rose by 4.2% and its operating income fell by 48.7%.

In 1Q16, the company’s net income and EPS (earnings per share) fell to $46.9 million and $0.71, respectively, compared with $88.6 million and $1.30, respectively, in 1Q15.

Polaris Industries’ cash and cash equivalents and inventories rose by 31.4% and 12.8%, respectively, between 1Q15 and 1Q16. Its current ratio fell to 1.4x and its debt-to-equity ratio rose to 1.5x in 1Q16, compared with a current ratio and a debt-to-equity ratio of 1.5x and 1.4x, respectively, in 1Q15.

Projections

Polaris Industries (PII) has made the following projections for 2016:

  • sales growth in the range of -2%–3% due to overall economic trends and power sports industry trends for the remainder of 2016
  • EPS in the range of $6.20–$6.80

 In the next part of this series, we’ll take a look at AptarGroup.

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